(Address, including zip code, and telephone number, including
area code, of registrants principal executive offices)

John W. Allison

Chairman and Chief Executive Officer

Home BancShares, Inc.

719 Harkrider, Suite 100

Conway, Arkansas 72032

(501) 329-9330

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies of Communications to:

John S. Selig, Esq.

Chet A. Fenimore, Esq.

Mitchell, Williams, Selig, Gates &

Jenkens & Gilchrist, P.C.

Woodyard, P.L.L.C.

and

401 Congress Avenue, Suite 2500

425 West Capitol Avenue, Suite 1800

Austin, Texas 78701

Little Rock, Arkansas 72201

Telephone: (512) 499-3800

Telephone: (501) 688-8804

Facsimile: (512) 499-3810

Facsimile: (501) 918-7804

Approximate date of commencement of proposed sale to the
public: As soon as practicable after the effective date of
this Registration Statement.

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box. o

If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o

If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o

If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o

The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.

The
information in this preliminary prospectus is not complete and
may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell these securities and is not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.

SUBJECT TO COMPLETION, DATED
MAY 31, 2006

PRELIMINARY PROSPECTUS

2,500,000 Shares

Common Stock

We are a financial holding company located in Conway, Arkansas,
with banking operations in central and north central Arkansas,
the Florida Keys and southwestern Florida. We are offering
2,500,000 shares of our common stock.

Prior to this offering there has been no public market for our
common stock. It is currently estimated that the public offering
price will be between $16.00 and $18.00 per share. See
Underwriting for a discussion of the factors
considered in determining the public offering price. The market
price of the shares after the offering may be higher or lower
than the public offering price.

We have applied to have our common stock listed on The Nasdaq
National Market under the symbol HOMB.

We have granted the underwriters an option to purchase up to
375,000 additional shares of our common stock on the same terms
as set forth above to cover over-allotments, if any. The
underwriters may exercise this option at any time within
30 days after the offering.

Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.

These securities are not savings accounts, deposits or other
obligations of any bank and are not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other governmental
agency and may lose value.

The underwriters expect to deliver the shares to purchasers on
or
about ,
2006, subject to customary closing conditions.

You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not,
and the underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in
this prospectus is accurate only as of the date on the cover
page of this prospectus. Our business, financial condition,
results of operations and prospects may have changed since that
date.

In this prospectus we rely on and refer to information and
statistics regarding the banking industry in the Arkansas and
Florida markets. We obtained the market data from independent
publications or other publicly available information.

No action is being taken in any jurisdiction outside the
United States to permit a public offering of the common stock or
possession or distribution of this prospectus in that
jurisdiction. Persons who come into possession of this
prospectus in jurisdictions outside the United States are
required to inform themselves about and to observe any
restrictions as to this offering and the distribution of this
prospectus applicable to those jurisdictions.

This summary highlights selected information contained
elsewhere in this prospectus, including a description of the
material terms of the offering, and may not contain all of the
information that you should consider before investing in our
common stock. To understand this offering fully, you should
carefully read the entire prospectus, including the sections
entitled Risk Factors, and Managements
Discussion and Analysis of Financial Condition and Results of
Operations, together with our consolidated financial
statements and the related notes, before making an investment
decision. Unless the context indicates otherwise, all
information in this prospectus (i) assumes that the
underwriters will not exercise their option to purchase
additional shares to cover over-allotments; and
(ii) reflects the effect of a three-for-one stock split
effected as a stock dividend on May 31, 2005.

Home BancShares

We are a financial holding company headquartered in Conway,
Arkansas. Our five wholly owned community bank subsidiaries
provide a broad range of commercial and retail banking and
related financial services to businesses, real estate developers
and investors, individuals, and municipalities. Three of our
bank subsidiaries are located in the central Arkansas market
area, a fourth serves Stone County in north central Arkansas,
and a fifth serves the Florida Keys and southwestern Florida.

We have achieved significant growth through acquisitions,
organic growth and establishing new (also commonly referred to
as de novo) branches. Our diluted earnings per share
increased from $0.29 for the year ended December 31, 2001,
to $0.82 for 2005. In addition from December 31, 2001, to
March 31, 2006, we have:



increased our total assets from $322.0 million to
$2.0 billion;



increased our loans receivable from $235.7 million to
$1.2 billion;



increased our total deposits from $237.3 million to
$1.5 billion; and



expanded our branch network from eight to 48.

Our History and Management Team

We were established in 1998 when an investor group led by John
W. Allison, our Chairman and Chief Executive Officer, and Robert
H. Adcock, Jr., our former Vice Chairman and the current
Arkansas State Bank Commissioner, formed Home BancShares, Inc.
to acquire a bank charter and establish First State Bank in
Conway, Arkansas. We or members of our management team have also
been involved in the formation of two of our other bank
subsidiaries  Twin City Bank and Marine
Bank  both of which we acquired in 2005. We have also
acquired and integrated our two other bank
subsidiaries  Community Bank and Bank of Mountain
View  in 2003 and 2005, respectively.

We acquire, organize and invest in community banks that serve
attractive markets, and build our community banks around
experienced bankers with strong local relationships. The
historical growth of our two largest bank subsidiaries compares
favorably with the fastest growing newly chartered (also
commonly referred to as de novo) banks in the United
States: First State Bank would rank 20th compared with the
140 commercial banks established in 1998 (based on total
asset growth from December 31, 1998, to December 31,
2005), and Twin City Bank would rank seventh compared with the
173 commercial banks established in 2000 (based on total asset
growth from December 31, 2000, to December 31, 2005).

Our management team is led by our founder, Chairman and Chief
Executive Officer, John W. Allison; our President and Chief
Operating Officer, Ron W. Strother; and our Chief Financial
Officer, Randy E. Mayor. Mr. Allison has more than
23 years of banking experience, including his service on
the board of directors of First Commercial Corporation from 1984
to 1998. Prior to its sale in 1998, First Commercial Corporation
was a publicly traded company and the largest bank holding
company headquartered in Arkansas, with approximately
$7.3 billion in assets. While on the board of First
Commercial Corporation, Mr. Allison served as the Chairman
of the Executive Committee from 1996 to 1998, and also served as
Chairman of the Asset Quality Committee for several years.
Mr. Strother joined Home BancShares in 2004 and has more
than 33 years of banking experience, which includes serving
as Chairman and Chief Executive Officer of Central
Bank & Trust Company (Little Rock), and President and
Chief Operating Officer of First Commercial Bank (Little Rock).
Mr. Mayor joined Home Bancshares in 1998 as Executive Vice
President and Finance Officer,

and became our first Chief Financial Officer in 2004. From 1988
until 1998, Mr. Mayor held various positions at First
National Bank of Conway, a subsidiary of First Commercial
Corporation, including Senior Vice President and Finance Officer
from 1992 to 1998.

Our senior management team  the three senior
executives of Home BancShares and our five bank
presidents  has, on average, more than 27 years
of banking experience. Our executive officers and directors
beneficially owned approximately 46.2% of our outstanding common
stock, as of May 23, 2006.

Since our inception in 1998, we have grown total assets through
a combination of organic growth and acquisitions. The table
below lists our bank subsidiaries and the dates of the
acquisitions of their respective parent companies:

Bank Subsidiary

Location

Effective Date of Acquisition

First State Bank

Conway, Arkansas

October 26, 1998

Community Bank

Cabot, Arkansas

December 1, 2003

Twin City Bank

North Little Rock, Arkansas

January 1, 2005(1)

Marine Bank

Marathon, Florida

June 1, 2005(2)

Bank of Mountain View

Mountain View, Arkansas

September 1, 2005

(1)

Prior to the date of the acquisition, we owned approximately 32%
of the shares of TCBancorp, the parent company of Twin City Bank.

(2)

In 1995, Mr. Allison, our Chairman and Chief Executive
Officer, was a founding board member of Marine Bancorp, the
parent company of Marine Bank. He owned approximately 13.9% of
Marine Bancorps shares at the time of our acquisition.

In May 2005, we invested $9.1 million to acquire 20% of the
common stock of White River Bancshares, Inc., the holding
company for Signature Bank in Fayetteville, Arkansas. In January
2006, we invested an additional $3.0 million to maintain
this 20% ownership position.

Our Growth Strategy

Our goals are to achieve growth in earnings per share and to
create and build shareholder value. Our growth strategy entails
the following:



Organic growth  We believe that our current
branch network provides us with the capacity to grow
significantly within our existing market areas. Twenty-four of
our 48 branches (including the branches of the banks we
have acquired) have been opened since the beginning of 2001. As
these newer branches continue to mature, we expect to see
additional organic loan and deposit growth and increased
profitability. Furthermore, we plan to broaden the product lines
within each of our bank subsidiaries by cross-selling products
such as insurance and trust services.



De novo branching  We intend to continue to
open de novo branches in our current markets and in other
attractive market areas if opportunities arise. In 2006, we have
opened branches in Searcy and Beebe, Arkansas, and Port
Charlotte, Florida. We plan to open an additional four to
six branches in 2006, including one to two in Arkansas, one
to two in the Florida Keys, and two along the southwestern coast
of Florida.



Strategic acquisitions  We will continue to
consider strategic acquisitions, with a primary focus on
Arkansas and southwestern Florida. When considering a potential
acquisition, we assess a combination of factors, but concentrate
on the strength of existing executive officers, the growth
potential of the bank and the market, the profitability of the
bank, and the valuation of the bank. We believe that potential
sellers consider us an acquirer of choice, largely due to our
community banking philosophy. With each acquisition we seek to
maintain continuity of executive officers and the board of
directors, consolidate back office operations, add product
lines, and implement our credit policy.

pursue the business relationships of our boards of directors,
executive officers, shareholders, and customers to actively
promote our community banks; and



maintain our commitment to the communities we serve by
supporting their civic and nonprofit organizations.

We believe that these principles are a competitive advantage
when serving our customers, particularly as we compete with
larger banks headquartered outside of our markets. Through our
bank subsidiaries and their boards of directors and employees,
we plan to continue building a high-performing banking
organization with exceptional customer service.

Emphasis on credit quality  Credit quality is
our first priority in the management of our bank subsidiaries.
We employ a set of credit standards across our bank subsidiaries
that are designed to ensure the proper management of credit
risk. Our management team plays an active role in monitoring
compliance with these credit standards at each of our bank
subsidiaries. We have a centralized loan review process and
regularly monitor each of our bank subsidiaries loan
portfolios, which we believe enables us to take prompt action on
potential problem loans. Non-performing assets as a percentage
of total assets decreased from 1.18% as of December 31,
2004, to 0.45% as of March 31, 2006.



Continue to improve profitability  We intend
to improve our profitability as we leverage the available
capacity of our newer branches and employees. We believe our
investments in our branch network and centralized technology
infrastructure are sufficient to support a larger organization,
and therefore believe increases in our expenses should be lower
than the corresponding increases in our revenues. We also plan
to increase our fee-based revenue by offering all our products
and services, including insurance and trust services, through
each of our bank subsidiaries.



Attract and motivate experienced bankers  We
believe a major factor in our success has been our ability to
attract and retain bankers that have experience in and knowledge
of their local communities. For example, in January 2006, we
hired eight experienced bankers in the Searcy, Arkansas, market
(located approximately 50 miles northeast of Little Rock),
where we subsequently opened a new branch. Hiring and retaining
experienced relationship bankers has been integral to our
ability to grow quickly when entering new markets. We will
continue to recruit experienced relationship bankers as our
banking franchise expands.



Leveraging our infrastructure  The support
services we provide to our bank subsidiaries are generally
centralized in Conway, Arkansas. These services include finance
and accounting, internal audit, compliance, loan review, human
resources, training, and data processing. We believe the
centralization of our support services enhances efficiencies,
maintains consistency in policies and procedures, and enables
our employees to focus on developing and strengthening customer
relationships.

As of March 31, 2006, we conducted business principally
through 40 branches in five counties in Arkansas, seven
branches in the Florida Keys, and one branch in southwestern
Florida. We opened three branches in the first quarter of 2006
and plan to open four to six additional branches by
year-end. Our branch
footprint includes markets in which we are the deposit market
share leader, as well as markets where we believe we have
significant opportunities for deposit market share growth.

Arkansas

We are currently the deposit market share leader in Conway,
Cabot, North Little Rock, and Mountain View, Arkansas. In these
markets, we plan to continue our organic growth while improving
profitability. Furthermore, we plan to open an additional one to
two branches in certain growing communities surrounding Cabot,
Conway, and North Little Rock in 2006, in addition to the
branches opened in Beebe in January 2006 and Searcy in February
2006.

Conway  First State Bank opened its first
branch in Conway in 1999 and, as of June 30, 2005, had a
27.1% deposit market share. Conway is located on Interstate 40,
approximately 30 miles northwest of Little Rock.
Conways population is projected to increase by 11.6% from
2005 to 2010.

Cabot  We entered the Cabot market in 2003
through the acquisition of Community Financial Group and, as of
June 30, 2005, had a 45.8% deposit market share. Cabot is
located approximately 25 miles north of Little Rock.
Cabots population is projected to increase by 16.9% from
2005 to 2010.

North Little Rock  Twin City Bank entered the
North Little Rock market in 2000 and, as of June 30, 2005,
had a 27.6% deposit market share.

Mountain View  We entered the Mountain View
market through the acquisition of Mountain View Bancshares in
September 2005 and, as of June 30, 2005, the Bank of
Mountain View had an 84.9% deposit market share. Mountain View
is located approximately 75 miles north of Conway and is
the seat of Stone County.

Little Rock  Twin City Bank began branching
into Little Rock in May 2003 and, as of June 30, 2005, had
a 2.8% deposit market share. Little Rock is the state capital of
Arkansas and is the states largest city. Little Rock had
an estimated population of 189,364 in 2005, and its per capita
income is projected to increase 29.0% between 2005 and 2010.
Little Rock should continue to benefit economically from the
growing communities on the outer edges of the greater Little
Rock metropolitan statistical area, including Conway and Cabot.

Florida

Florida Keys (Monroe County)  We entered the
Florida Keys in 2005 through the acquisition of Marine Bank. As
of June 30, 2005, Marine Bank had a 9.5% deposit market
share in Monroe County. The Florida Keys encompass a
100-mile string of
islands located in Monroe County on the southern tip of Florida,
and are a popular tourist and retirement destination. We believe
that we have growth opportunities both within the Keys and in
nearby markets in southwestern Florida.

Southwestern Florida  We opened a branch in
Port Charlotte (Punta Gorda MSA) in March 2006 and plan to open
branches in Punta Gorda and Marco Island (Naples-Marco Island
MSA) during 2006. As of June 30, 2005, there were
approximately $13.1 billion deposits and approximately
475,000 residents in these two combined MSAs. The expected
population growth between 2005 and 2010 in the Punta Gorda MSA
and the Naples-Marco-Island MSA is 11.6% and 25.5%, respectively.

Performance Summary for the Three Months Ended March 31,
2006 and 2005

Our net income increased $1.3 million, or 60.6%, to
$3.5 million for the three-month period ended
March 31, 2006, from $2.2 million for the same period
in 2005. On a diluted earnings per share basis, our net earnings
increased 50.0% to $0.24 for the three-month period ended
March 31, 2006, as compared to $0.16 for the same period in
2005. The increase in earnings is primarily associated with our
acquisitions of Marine Bancorp, Inc. and Mountain View
Bancshares during the second and third quarters of 2005,
respectively, combined with organic growth of our bank
subsidiaries.

For the first quarter, our annualized return on average equity
was 8.51%, our annualized return on average assets was 0.74%,
our annualized net interest margin was 3.53%, and our efficiency
ratio was 66.68%.

Recent Developments

Stock Split. On May 31, 2005, we effected a
three-for-one stock split by means of a stock dividend. Each
holder of shares of our common stock at the time of the stock
dividend was issued two additional shares of common stock for
each share then held. The information contained in this
prospectus has been adjusted to give effect to the stock split,
unless otherwise indicated.

Proposed Conversion of Preferred Stock. As of
March 31, 2006, we had 2,090,812 shares of
Class A preferred stock and 169,760 shares of
Class B preferred stock outstanding, as well as exercisable
options for 11,703 shares of Class A preferred stock
and 23,827 shares of Class B preferred stock. We will
have, following this offering, the option to convert all of the
outstanding preferred shares into shares of our common stock,
and it is our intent to cause those conversions as soon as
practicable after the offering is completed. The applicable
conversion rates are 0.789474 share of common stock for
each share of Class A preferred stock, and three shares of
common stock for each share of Class B preferred stock.
Thus, upon conversion of all outstanding shares of Class A
preferred stock and Class B preferred stock, approximately
2,159,921 additional shares of our common stock will be issued.
The exercise of the preferred stock options and the conversion
of the underlying preferred shares into common stock would
result in approximately 80,720 additional shares of our
common stock being issued. If we do not convert the shares of
Class A preferred stock before June 6, 2006, or the
shares of Class B preferred stock before July 6, 2006,
the holders of those shares may, at their option, require us to
convert their shares into common stock, using the same
conversion rates.

Registration of Our Common Stock. We have filed a
Form 10 registration statement to register our common
stock, which, when declared effective, will make us subject to
the periodic and other reporting requirements of the Securities
Exchange Act of 1934. This filing was required because, as of
December 31, 2005, we had more than 500 record holders
of our outstanding shares of common stock. The first of our
periodic filings under that Act is expected to be a
Form 10-Q for the
quarter ending on June 30, 2006.

Corporate Information

Our headquarters are located at 719 Harkrider, Conway, Arkansas
72032, and our telephone number is (501)328-4757. We maintain a
website at www.homebancshares.com. Information on our
website is not incorporated by reference and is not a part of
this prospectus.

We estimate the net proceeds of this offering will be
$38.7 million, based on the midpoint of the price range on
the cover page of this prospectus. We will use the net proceeds
of this offering for general corporate purposes, which may
include, among other things, our working capital needs and
providing investments in our bank subsidiaries. We may also use
a portion of the net proceeds to finance bank acquisitions,
though we have no present plans in that regard. See Use of
Proceeds.

Risk factors

See Risk Factors beginning on page 9 and other
information included in this prospectus for a discussion of
factors you should consider carefully before deciding to invest
in our common stock.

Dividend policy

We have paid quarterly cash dividends on our common stock
beginning with the second quarter of 2003. We anticipate
continuing to pay cash dividends on the common stock in the
foreseeable future, subject to the prior payment of dividends on
our outstanding shares of preferred stock and interest on our
subordinated debentures. However, any future determination
relating to dividends will be made at the discretion of our
board of directors and will depend on a number of factors,
including our future earnings, capital requirements, financial
condition, future prospects, regulatory restrictions and other
factors that our board of directors may deem relevant. See
Price Range of Our Common Stock and Dividends.

Proposed Nasdaq National Market symbol

We have applied to have our common stock listed on The Nasdaq
National Market under the symbol HOMB.

(1)

The number of shares offered assumes that the underwriters do
not exercise their over-allotment option. If the underwriters do
exercise their over-allotment option, we will issue and sell up
to an additional 375,000 shares.

(2)

The number of shares outstanding after this offering is based on
the 12,129,355 shares outstanding as of March 31, 2006, and
excludes the following: (i) 968,244 shares of common
stock issuable upon the exercise of stock options outstanding as
of March 31, 2006, of which options for 481,224 shares of
common stock were exercisable on that date;
(ii) 151,036 shares of common stock as of
March 31, 2006, reserved for issuance pursuant to future
grants under our 2006 Stock Option and Performance Incentive
Plan; (iii) 2,159,921 shares of common stock issuable
upon conversion of the shares of our Class A preferred
stock and Class B preferred stock that were outstanding as
of March 31, 2006 (which conversions we intend to effect as
soon as practicable after this offering is completed);
(iv) 80,720 shares of common stock issuable upon the
exercise and conversion of preferred stock options outstanding
as of March 31, 2006, all of which were exercisable on that
date; and (v) up to 375,000 shares of common stock
that may be issued upon the exercise of the underwriters
over-allotment option.

We derived our summary historical consolidated financial data
as of December 31, 2005 and 2004, and for each of the three
years ended December 31, 2005, 2004, and 2003, from our
audited financial statements and related notes included in this
prospectus. The summary historical consolidated financial data
as of December 31, 2003, 2002, and 2001, and for each of
the two years ended December 31, 2002 and 2001, have been
derived from our audited financial statements, which are not
included in this prospectus. The summary historical financial
data as of or for the three months ended March 31, 2006 and
2005 have been derived from our unaudited interim financial
statements and include, in the opinion of management, all
adjustments necessary to present fairly the data for such
period. The per share financial data presented below have been
adjusted to give effect to the three-for-one stock split in the
form of a stock dividend effected on May 31, 2005. You
should read the information below in conjunction with the
audited financial statements and related notes, along with
Managements Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in
this prospectus.

As of or for the Three

Months Ended March 31,

As of or for the Years Ended December 31,

2006

2005

2005

2004

2003

2002

2001

(Dollars and shares in thousands, except per share data)

Income statement data:

Total interest income

$

27,734

$

16,361

$

85,458

$

36,681

$

21,538

$

20,361

$

18,216

Total interest expense

12,928

6,355

36,002

11,580

8,240

7,490

8,872

Net interest income

14,806

10,006

49,456

25,101

13,298

12,871

9,344

Provision for loan losses

484

1,051

3,827

2,290

807

2,220

1,708

Net interest income after provision for loan losses

14,322

8,955

45,629

22,811

12,491

10,651

7,636

Non-interest income

4,401

3,813

15,222

13,681

6,739

5,354

2,895

Gain on sale of equity investment





465

4,410







Non-interest expense

13,619

9,636

44,935

26,131

13,070

10,052

8,364

Income before income taxes and minority interest

5,104

3,132

16,381

14,771

6,160

5,953

2,167

Provision for income taxes

1,588

943

4,935

5,030

2,343

2,076

811

Minority interest







582

48





Net income

$

3,516

$

2,189

$

11,446

$

9,159

$

3,769

$

3,877

$

1,356

Per share data:

Basic earnings

$

0.28

$

0.18

$

0.92

$

1.08

$

0.66

$

0.78

$

0.30

Diluted earnings

0.24

0.16

0.82

0.94

0.63

0.77

0.29

Diluted cash earnings(1)

0.26

0.18

0.89

0.98

0.64

0.77

0.29

Book value per common share

11.68

10.88

11.45

10.75

9.79

8.36

7.28

Book value per share with preferred converted to common(2)

11.83

11.10

11.63

11.07

10.29

8.36

7.28

Tangible book value per common share(3)(7)

7.70

8.57

7.43

7.89

6.63

8.36

7.28

Tangible book value per share with preferred converted to
common(2)(3)(7)

Shares of Class A preferred stock and Class B
preferred stock outstanding on the indicated dates are assumed
to have been converted to shares of common stock. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations 
Table 21, on page 57.

(3)

Tangible calculations eliminate the effect of goodwill and
acquisition-related intangible assets and the corresponding
amortization expense on a tax-effected basis.

An investment in our common stock involves risks. Before
making an investment decision, you should carefully consider the
risks described below, together with our consolidated financial
statements and the related notes and the other information
included in this prospectus. The discussion below presents
material risks associated with an investment in our common
stock. If any of the following risks actually occur, our
business, financial condition and results of operations could be
harmed. In such a case, the trading price of our common stock
could decline, and you may lose all or part of your investment.
The risks discussed below also include forward-looking
statements, and our actual results may differ substantially from
those discussed in these forward-looking statements. See
Cautionary Note Regarding Forward-Looking
Statements.

Risks Related to Our Business

Our decisions regarding credit risk could be inaccurate
and our allowance for loan losses may be inadequate, which would
materially and adversely affect our business, financial
condition, results of operations and future prospects.

Management makes various assumptions and judgments about the
collectibility of our loan portfolio, including the
creditworthiness of our borrowers and the value of the real
estate and other assets serving as collateral for the repayment
of our secured loans. We maintain an allowance for loan losses
that we consider adequate to absorb future losses which may
occur in our loan portfolio. In determining the size of the
allowance, we analyze our loan portfolio based on our historical
loss experience, volume and classification of loans, volume and
trends in delinquencies and non-accruals, national and local
economic conditions, and other pertinent information. As of
March 31, 2006, our allowance for loan losses was
approximately $24.4 million, or 1.96% of our total loans
receivable.

If our assumptions are incorrect, our current allowance may be
insufficient to cover future loan losses, and increased loan
loss reserves may be needed to respond to different economic
conditions or adverse developments in our loan portfolio. In
addition, federal and state regulators periodically review our
allowance for loan losses and may require us to increase our
allowance for loan losses or recognize further loan charge-offs
based on judgments different than those of our management. Any
increase in our allowance for loan losses or loan charge-offs
could have a negative effect on our operating results.

Because we have a high concentration of loans secured by
real estate, a downturn in the real estate market could result
in losses and materially and adversely affect business,
financial condition, results of operations and future
prospects.

A significant portion of our loan portfolio is dependent on real
estate. As of March 31, 2006, approximately 82.2% of our
loans had real estate as a primary or secondary component of
collateral. The real estate collateral in each case provides an
alternate source of repayment in the event of default by the
borrower and may deteriorate in value during the time the credit
is extended. An adverse change in the economy affecting values
of real estate generally or in our primary markets specifically
could significantly impair the value of our collateral and our
ability to sell the collateral upon foreclosure. Furthermore, it
is likely that we would be required to increase our provision
for loan losses. If we are required to liquidate the collateral
securing a loan to satisfy the debt during a period of reduced
real estate values or to increase our allowance for loan losses,
our profitability and financial condition could be adversely
impacted.

Because we have a concentration of exposure to a number of
individual borrowers, a significant loss on any of those loans
could materially and adversely affect our business, financial
condition, results of operations, and future prospects.

We have a concentration of exposure to a number of individual
borrowers. Under applicable law, each of our bank subsidiaries
is generally permitted to make loans to one borrowing
relationship up to 20% of their respective capital in the case
of our Arkansas bank subsidiaries, and 15% of capital (25% on
secured loans) in the case of our Florida bank subsidiary.
Historically, when our bank subsidiaries have lending
relationships that exceed their individual loan to one borrower
limitation, the overline, or amount in excess of the subsidiary

banks legal lending limit, is participated to our other
bank subsidiaries. As a result, on a consolidated basis we may
have aggregate exposure to individual or related borrowers in
excess of each individual bank subsidiarys legal lending
limit. As of March 31, 2006, the aggregate legal lending
limit of our bank subsidiaries for secured loans was
approximately $34.4 million. Currently, our board of
directors has established an in-house consolidated lending limit
of $16.0 million to any one borrowing relationship without
obtaining the approval of our Chairman and our Vice Chairman.

As of March 31, 2006, we had 11 borrowing relationships
where we had a commitment to loan in excess of
$10.0 million, with the aggregate amount of those
commitments totaling approximately $180.0 million. The
largest of those commitments to one borrowing relationship was
$27.3 million, which is 16.1% of our consolidated
shareholders equity. Given the size of these loan
relationships relative to our capital levels and earnings, a
significant loss on any one of these loans could materially and
adversely affect our business, financial condition, results of
operations, and future prospects.

Our success depends significantly on our executive officers,
especially John W. Allison, Ron W. Strother, Randy E. Mayor, and
on the presidents of our bank subsidiaries. Our bank
subsidiaries, in particular, rely heavily on their management
teams relationships in their local communities to generate
business. Because we do not have employment agreements or
non-compete agreements with our employees, our executive
officers and bank presidents are free to resign at any time and
accept an employment offer from another company, including a
competitor. The loss of services from a member of our current
management team may materially and adversely affect our
business, financial condition, results of operations and future
prospects.

Our growth and expansion strategy may not be successful
and our market value and profitability may suffer.

Growth through the acquisition of banks, de novo
branching, and the organization of new banks represents an
important component of our business strategy. Although we have
no present plans to acquire any financial institution or
financial services provider, any future acquisitions we might
make will be accompanied by the risks commonly encountered in
acquisitions. These risks include, among other things:



credit risk associated with the acquired banks loans and
investments;



difficulty of integrating operations and personnel; and



potential disruption of our ongoing business.

We expect that competition for suitable acquisition candidates
may be significant. We may compete with other banks or financial
service companies with similar acquisition strategies, many of
which are larger and have greater financial and other resources.
We cannot assure you that we will be able to successfully
identify and acquire suitable acquisition targets on acceptable
terms and conditions.

In addition to the acquisition of existing financial
institutions, we plan to continue de novo branching, and
we may consider the organization of new banks in new market
areas. We do not, however, have any current plans to organize a
new bank. De novo branching and any acquisition or
organization of a new bank carries with it numerous risks,
including the following:



the inability to obtain all required regulatory approvals;



significant costs and anticipated operating losses associated
with establishing a de novo branch or a new bank;



the inability to secure the services of qualified senior
management;



the local market may not accept the services of a new bank owned
and managed by a bank holding company headquartered outside of
the market area of the new bank;

the inability to obtain attractive locations within a new market
at a reasonable cost; and



the additional strain on management resources and internal
systems and controls.

We cannot assure that we will be successful in overcoming these
risks or any other problems encountered in connection with
acquisitions, de novo branching and the organization of
new banks. Our inability to overcome these risks could have an
adverse effect on our ability to achieve our business strategy
and maintain our market value and profitability.

We expect to continue to grow our assets and deposits, the
products and services we offer, and the scale of our operations,
generally, both internally and through acquisitions. If we
continue to grow rapidly, we may not be able to control costs
and maintain our asset quality. Our ability to manage our growth
successfully will depend on our ability to maintain cost
controls and asset quality while attracting additional loans and
deposits on favorable terms. If we grow too quickly and are not
able to control costs and maintain asset quality, this rapid
growth could materially and adversely affect our financial
performance.

There may be undiscovered risks or losses associated with
our acquisitions of bank subsidiaries which would have a
negative impact upon our future income.

Our growth strategy includes strategic acquisitions of bank
subsidiaries. We acquired three bank subsidiaries in 2005, and
will continue to consider strategic acquisitions, with a primary
focus on Arkansas and southwestern Florida. In most cases, our
acquisition of a bank includes the acquisition of all of the
target banks assets and liabilities, including its loan
portfolio. There may be instances when we, under our normal
operating procedures, may find after the acquisition that there
may be additional losses or undisclosed liabilities with respect
to the assets and liabilities of the target bank, and, with
respect to its loan portfolio, that the ability of a borrower to
repay a loan may have become impaired, the quality of the value
of the collateral securing a loan may fall below our standards,
or the allowance for loan losses may not be adequate. One or
more of these factors might cause us to have additional losses
or liabilities, additional loan charge-offs, or increases in
allowances for loan losses, which would have a negative impact
upon our future income.

Our business is affected by prevailing economic conditions in
the United States, including inflation and unemployment rates,
but is particularly subject to the local economies in Arkansas,
the Florida Keys and southwestern Florida. Our relatively small
size and our geographic concentration expose us to greater risk
of unfavorable local economic conditions than the larger
national or regional banks in our market areas. Adverse changes
in local economic factors, such as population growth trends,
income levels, deposits and housing starts, may adversely affect
our operations.

We are at risk of natural disaster or acts of terrorism, even if
our market areas are not primarily affected. Our Florida market,
in particular, is subject to risks from hurricanes, which may
damage or dislocate our facilities, damage or destroy
collateral, adversely affect the livelihood of borrowers or
otherwise cause significant economic dislocation in areas we
serve.

If and when economic conditions deteriorate, either in our local
market areas or nationwide, we may experience a reduction in the
demand for our products and services and deterioration in the
quality of our loan portfolio and consequently have a material
and adverse effect on our business, financial condition, results
of operations and future prospects.

Competition from other financial institutions may
adversely affect our profitability.

The banking business is highly competitive. We experience strong
competition, not only from commercial banks, savings and loan
associations, and credit unions, but also from mortgage banking
firms, consumer finance companies, securities brokerage firms,
insurance companies, money market funds, and other financial
institutions operating in or near our market areas. We compete
with these institutions both in attracting deposits and in
making loans.

Many of our competitors are much larger national and regional
financial institutions. We may face a competitive disadvantage
against them as a result of our smaller size and resources and
our lack of geographic diversification.

We also compete against community banks that have strong local
ties. These smaller institutions are likely to cater to the same
small and mid-sized businesses that we target and to use a
relationship-based approach similar to ours. In addition, our
competitors may seek to gain market share by pricing below the
current market rates for loans and paying higher rates for
deposits. Competitive pressures can adversely affect our
profitability.

Our recent results do not indicate our future results, and
may not provide guidance to assess the risk of an investment in
our common stock.

We are unlikely to sustain our historical rate of growth, and
may not even be able to expand our business at all. Further, our
recent growth may distort some of our historical financial
ratios and statistics. In the future, we may not have the
benefit of several recently favorable factors, such as a strong
residential housing market or the ability to find suitable
expansion opportunities. Various factors, such as economic
conditions, regulatory and legislative considerations and
competition, may also impede or prohibit our ability to expand
our market presence. If we are not able to successfully grow our
business, our financial condition and results of operations
could be adversely affected.

We may not be able to raise the additional capital we need
to grow and, as a result, our ability to expand our operations
could be materially impaired.

Federal and state regulatory authorities require us and our bank
subsidiaries to maintain adequate levels of capital to support
our operations. While we believe that our capital will be
sufficient to support our current operations and anticipated
expansion, factors such as faster than anticipated growth,
reduced earning levels, operating losses, changes in economic
conditions, revisions in regulatory requirements, or additional
acquisition opportunities may lead us to seek additional capital.

Our ability to raise additional capital, if needed, will depend
on our financial performance and on conditions in the capital
markets at that time, which are outside our control. If we need
additional capital but cannot raise it on terms acceptable to
us, our ability to expand our operations could be materially
impaired.

We are considered by the Federal Reserve Board to be a
source of financial strength for White River
Bancshares and may be required to support its capital.

We hold a 20% ownership interest in White River Bancshares,
Inc., a bank holding company headquartered in Fayetteville,
Arkansas. Our minority ownership means that we lack effective
power to control the operations of the holding company. We are,
nevertheless, considered by the Federal Reserve Board to be a
source of financial strength for that holding company. As a
result, we may be required to contribute sufficient funds for
White River Bancshares to meet regulatory capital requirements
if it is unable to raise funds from other sources. An obligation
to support White River Bancshares may be required at times when,
in the absence of this Federal Reserve Board policy, we might
not be inclined to provide it. As of and for the year ended
December 31, 2005, White River Bancshares had total assets
of $184.7 million, total shareholders equity of
$51.2 million, and a net operating loss of
$2.7 million. The capital ratios for White River
Bancshares wholly-owned bank subsidiary, Signature Bank of
Arkansas, at year-end and the minimum ratios required to be
considered well capitalized were: leverage ratio,
24.7% (5.0% required); Tier 1 capital ratio, 27.8% (6.0%
required); and total risk-based capital ratio, 29.0% (10.0%
required).

We may be unable to, or choose not to, pay dividends on
our common stock.

Although we have paid a quarterly dividend on our common stock
since the second quarter of 2003 and expect to continue this
practice, we cannot assure you of our ability to continue. Our
ability to pay dividends depends on the following factors, among
others:



We may not have sufficient earnings since our primary source of
income, the payment of dividends to us by our bank subsidiaries,
is subject to federal and state laws that limit the ability of
these banks to pay dividends.



Federal Reserve Board policy requires bank holding companies to
pay cash dividends on common stock only out of net income
available over the past year and only if prospective earnings
retention is consistent with the organizations expected
future needs and financial condition.



Before dividends may be paid on our common stock in any year,
dividends of $0.25 per share must first be paid on our
Class A preferred stock and $0.57 per share on our
Class B preferred stock.



Before dividends may be paid on our common stock in any year,
payments must be made on our subordinated debentures.



Our board of directors may determine that, even though funds are
available for dividend payments, retaining the funds for
internal uses, such as expansion of our operations, is a better
strategy.

If we fail to pay dividends, capital appreciation, if any, of
our common stock may be your sole opportunity for gains on your
investment.

Our directors and executive officers own a significant
portion of our common stock and can exert significant control
over our business and corporate affairs.

Our directors and executive officers, as a group, will
beneficially own approximately 38.6% of our common stock
immediately following this offering. Consequently, if they vote
their shares in concert, they can significantly influence the
outcome of all matters submitted to our shareholders for
approval, including the election of directors. The interests of
our officers and directors may conflict with the interests of
other holders of our common stock, and they may take actions
affecting our company with which you disagree.

The holders of our subordinated debentures have rights
that are senior to those of our shareholders.

We have $44.8 million of subordinated debentures issued in
connection with trust preferred securities. Payments of the
principal and interest on the trust preferred securities are
unconditionally guaranteed by us. The subordinated debentures
are senior to our shares of common stock. As a result, we must
make payments on the subordinated debentures (and the related
trust preferred securities) before any dividends can be paid on
our common stock and, in the event of our bankruptcy,
dissolution or liquidation, the holders of the debentures must
be satisfied before any distributions can be made to the holders
of our common stock. We have the right to defer distributions on
the subordinated debentures (and the related trust preferred
securities) for up to five years, during which time no dividends
may be paid to holders of our common stock.

Most of our assets and liabilities are monetary in nature, and
thus subject us to significant risks from changes in interest
rates. Consequently, our results of operations can be
significantly affected by changes in interest rates and our
ability to manage interest rate risk. Changes in market interest
rates, or changes in the relationships between short-term and
long-term market interest rates, or changes in the relationship
between different interest rate indices can affect the interest
rates charged on interest-earning assets differently than the
interest paid on interest-bearing liabilities. This difference
could result in an increase in interest expense relative to
interest income or a decrease in interest rate spread. In
addition to affecting our profitability, changes in interest
rates can impact the valuation of our assets and liabilities.

As of March 31, 2006, our one-year ratio of
interest-rate-sensitive assets to interest-rate-sensitive
liabilities was 104.1% and our cumulative gap position was 2.3%
of total earning assets, resulting in a minimum impact on
earnings for various interest rate change scenarios. Floating
rate loans made up 39.1% of our $1.2 billion loan
portfolio. In addition, 70.7% of our loans receivable and 81.3%
of our time deposits were scheduled to reprice within
12 months and our other rate sensitive asset and rate
sensitive liabilities composition is subject to change.
Significant composition changes in our rate sensitive assets or
liabilities could result in a more unbalanced position and
interest rate changes would have more of an impact to our
earnings.

Our results of operations are also affected by the monetary
policies of the Federal Reserve Board. Actions by the Federal
Reserve Board involving monetary policies could have an adverse
effect on our deposit levels, loan demand or business and
earnings.

We are subject to extensive regulation that could limit or
restrict our activities and impose financial requirements or
limitations on the conduct of our business, which limitations or
restrictions could adversely affect our profitability.

We are a registered financial holding company primarily
regulated by the Federal Reserve Board. Our bank subsidiaries
are also primarily regulated by the Federal Reserve Board, the
Federal Deposit Insurance Corporation, and the Arkansas State
Bank Department or Florida Office of Financial Regulation.

Complying with banking industry regulations is costly and may
limit our growth and restrict certain of our activities,
including payment of dividends, mergers and acquisitions,
investments, loans and interest rates charged, interest rates
paid on deposits and locations of offices. We are also subject
to capital requirements by our regulators. Violations of various
laws, even if unintentional, may result in significant fines or
other penalties, including restrictions on branching or bank
acquisitions. Recently, banks generally have faced increased
regulatory sanctions and scrutiny, particularly under the USA
Patriot Act and statutes that promote customer privacy or seek
to prevent money laundering. As regulation of the banking
industry continues to evolve, we expect the costs of compliance
to continue to increase and, thus, to affect our ability to
operate profitably.

Upon completion of this offering, we will become subject to the
many requirements of the Securities Exchange Act of 1934, the
Sarbanes-Oxley Act of 2002, and the related rules and
regulations promulgated by the Securities and Exchange
Commission and Nasdaq. These laws and regulations will increase
the scope, complexity and cost of our corporate governance,
reporting and disclosure practices. Although we are accustomed
to conducting business in a highly regulated environment, these
laws and regulations have different requirements for compliance
than we have previously experienced. Our expenses for
accounting, legal and consulting services will increase because
of the new obligations we will face as a public company. In
addition, the sudden application of these requirements to our
business will result in some cultural adjustments and may strain
our management resources.

To date, we have not conducted a comprehensive review and
confirmation of the adequacy of our existing systems and
controls as will be required under Section 404 of the
Sarbanes-Oxley Act, and will not do so until after the
completion of this offering. We may discover deficiencies in
existing systems and controls. If that is the case, we intend to
take the necessary steps to correct any deficiencies. These
steps may be costly and strain our resources. A decline in the
market price for our common stock may result if we are unable to
comply with the Sarbanes-Oxley Act.

Risks Related to This Offering

We have broad discretion in the use of the net proceeds
from this offering, and our use of those proceeds may not yield
a favorable return on your investment.

We will use the net proceeds of this offering for general
corporate purposes, which may include, among other things, our
working capital needs and providing investments in our bank
subsidiaries. We may also use the net proceeds to finance bank
acquisitions, though we have no present plans in that regard.
Thus, our

management has broad discretion over how these proceeds are used
and could spend the proceeds in ways with which you may not
agree. We may not invest the proceeds of this offering
effectively or in a manner that yields a favorable (or any)
return on our common stock, and consequently, this could result
in financial losses that could have a material adverse effect on
our business or cause the price of our common stock to decline.

There has been no prior active trading market for our
common stock. We cannot assure you that an active public trading
market will develop after the offering and, even if it does, our
stock price may trade below the public offering price.

There has been no public market for our common stock prior to
this offering. An active trading market for our common stock may
never develop or be sustained, which could affect your ability
to sell your shares.

Even if a market develops for our common stock after the
offering, the market price of our common stock may experience
significant volatility. Factors that may affect the price of our
common stock include the depth and liquidity of the market for
our common stock, investor perception of our financial strength,
conditions in the banking industry such as credit quality and
monetary policies, and general economic and market conditions.
Our quarterly operating results, changes in analysts
earnings estimates, changes in general conditions in the economy
or financial markets or other developments affecting us could
cause the market price of our common stock to fluctuate
substantially. In addition, the initial public offering price
has been determined through negotiations between us and the
underwriters, and may bear no relationship to the price at which
the common stock will trade upon completion of the offering.

Investors in this offering will experience immediate and
substantial dilution.

Purchasers in this offering will experience immediate dilution
to the extent of the difference between the initial public
offering price and the net tangible book value per share of our
common stock. This dilution is estimated to be $7.50 per share,
based on the assumed initial offering price of $17.00 per share
(the midpoint of the range set forth on the cover page of this
prospectus) and our pro forma net tangible book value of
$8.45 per share as of March 31, 2006. This per-share
dilution takes into account the conversion to common stock of
our outstanding shares of Class A preferred stock and
Class B preferred stock, as it is our intent to effect
those conversions as soon as practicable after the offering is
completed.

To the extent we raise additional capital by issuing equity
securities in the future, our shareholders may experience
additional dilution. Our board of directors may determine, from
time to time, a need to obtain additional capital through the
issuance of additional shares of common stock or other
securities. We may issue additional securities at prices or on
terms less favorable than or equal to the public offering price
and terms of this offering.

The ability of our insiders or the holders of our
Class A and Class B preferred stock to sell
substantial amounts of common stock after this offering may
depress the market price of our common stock or cause it to
decline.

There are three potentially significant sources of shares of our
common stock that may come on the market after this offering:



Our directors and executive officers will beneficially own
approximately 38.6% of our common stock immediately after this
offering. Although they are subject to lock-up
agreements with our underwriters, which generally prevent them
from selling their shares within 180 days after the
offering, the underwriters may release them from those
obligations. In any event, after the
lock-up agreements
expire, approximately 6.7 million additional shares of our
common stock could become tradable by our directors and
executive officers.



We intend to require that all of the outstanding shares of our
Class A preferred stock be converted to common stock as
soon as practicable after June 6, 2006, the first date on
which we can require conversion of those shares. We also intend,
as soon as practicable after this offering, to require that our
Class B preferred stock be converted to common stock.
Conversion of our Class A preferred stock and

Class B preferred stock will result in approximately
2,159,921 shares of our common stock being issued.
Approximately 80,720 additional shares of our common stock
may be issued upon exercise of outstanding preferred stock
options and the subsequent conversion to common stock of the
preferred shares issued. Most of the holders of the newly issued
shares of common stock will be eligible immediately to sell
their shares.



We intend to register all common stock that we may issue upon
exercise of outstanding options under our 2006 Stock Option and
Performance Incentive Plan. Once we register these shares, they
can be sold in the public market upon issuance, subject to
restrictions under the securities laws and, if applicable, the
lock-up agreements
described above. As of March 31, 2006, stock options to
purchase 968,244 shares of our common stock had been
granted under this plan, of which 481,224 are presently
exercisable.

Sales of a significant number of shares of our common stock
after this offering, or the expectation that these sales may
occur, could depress the market price of our common stock.

Some of our statements contained in this prospectus, including
matters discussed under the caption Managements
Discussion and Analysis of Financial Condition and Results of
Operation, are forward-looking statements.
Forward-looking statements relate to future events or our future
financial performance and include statements about the
competitiveness of the banking industry, potential regulatory
obligations, our entrance and expansion into other markets, our
other business strategies and other statements that are not
historical facts. Forward-looking statements are not guarantees
of performance or results. When we use words like
may, plan, contemplate,
anticipate, believe, intend,
continue, expect, project,
predict, estimate, could,
should, would, and similar expressions,
you should consider them as identifying forward-looking
statements, although we may use other phrasing. These
forward-looking statements involve risks and uncertainties and
are based on our beliefs and assumptions, and on the information
available to us at the time that these disclosures were
prepared. These forward-looking statements involve risks and
uncertainties and may not be realized due to a variety of
factors, including, but not limited to, the following:



the effects of future economic conditions, including inflation
or a decrease in residential housing values;



governmental monetary and fiscal policies, as well as
legislative and regulatory changes;



the risks of changes in interest rates or the level and
composition of deposits, loan demand and the values of loan
collateral, securities and interest sensitive assets and
liabilities;



the effects of terrorism and efforts to combat it;



credit risks;



the effects of competition from other commercial banks, thrifts,
mortgage banking firms, consumer finance companies, credit
unions, securities brokerage firms, insurance companies, money
market and other mutual funds and other financial institutions
operating in our market area and elsewhere, including
institutions operating regionally, nationally and
internationally, together with competitors offering banking
products and services by mail, telephone and the Internet;



the effect of any mergers, acquisitions or other transactions to
which we or our subsidiaries may from time to time be a party,
including our ability to successfully integrate any businesses
that we acquire; and



the failure of assumptions underlying the establishment of our
allowance for loan losses.

All written or oral forward-looking statements attributable to
us are expressly qualified in their entirety by this Cautionary
Note. Our actual results may differ significantly from those we
discuss in these forward-looking statements. For other factors,
risks and uncertainties that could cause our actual results to
differ materially from estimates and projections contained in
these forward-looking statements, see Risk Factors
beginning on page 9.

USE OF PROCEEDS

Our net proceeds from the sale of 2,500,000 shares of our
common stock in this offering (based on the mid-point of the
price range on the cover page of this prospectus) will be
approximately $38.7 million, after deducting underwriting
discounts and commissions and estimated offering expenses
payable by us. If the underwriters over-allotment option
is exercised in full, we estimate that our net proceeds will be
approximately $44.7 million.

We will use the net proceeds of this offering for general
corporate purposes. Those purposes may include, among other
things, meeting our working capital needs and providing
investments in our bank subsidiaries to support our growth,
including development of additional banking offices.
Additionally, we may use the net proceeds to finance bank
acquisitions, though we have no present plans in that regard.

We have not specifically allocated the amount of the net
proceeds that will be used for these purposes; however, we
believe that we will be able to deploy the net proceeds of this
offering in a manner that will maximize the return to our
investors. We are effecting this offering at this time because
we believe that based on our current financial position and
considering our historical growth and development and our
prospects for the future, we have reached a stage where we are
ready to be a public company with access to the public markets.

The precise amounts and timing of our use of the net proceeds
will depend upon market conditions and the availability of other
funds, among other factors. From time to time, we may engage in
additional capital financings as we determine to be appropriate
based upon our needs and prevailing market conditions. These
additional capital financings may include the sale of securities
other than, or in addition to, common stock.

PRICE RANGE OF OUR COMMON STOCK AND DIVIDENDS

Prior to this offering, our common stock has not been traded on
an established public trading market and quotations for our
common stock were not reported on any market. As a result, there
has been no regular market for our common stock. Although our
shares have been infrequently traded in private transactions,
those transactions have usually been between related parties and
at sales prices that did not necessarily reflect the price that
would be paid for our common stock in an active market.

We have applied to have our common stock listed on The Nasdaq
National Market under the symbol HOMB. We believe,
but cannot be certain, that a Nasdaq listing will substantially
enhance the trading market for our common stock. See Risk
Factors  Risks Related to This Offering,
beginning on page 14. As of March 31, 2006, there were
12,129,355 shares of our common stock outstanding, held by
approximately 998 holders of record.

Dividends are paid at the discretion of our board of directors.
We have paid regular quarterly cash dividends on our common
stock beginning with the second quarter of 2003, and our board
of directors presently intends to continue the payment of these
regular cash dividends. We paid dividends of $0.02 per common
share for the first quarter of 2006, and total dividends in the
amount of $0.07 per common share in 2005, $0.04 per
common share in 2004 and $0.01 per common share in 2003.
However, the amount and frequency of cash dividends, if any,
will be determined by our board of directors after consideration
of our earnings, capital requirements, our financial condition
and our ability to service any equity or debt obligations senior
to our common stock, and will depend on cash dividends paid to
us by our bank subsidiaries. As a result, our ability to pay
future dividends will depend on the earnings of our bank
subsidiaries, their financial condition and their need for funds.

There are a number of restrictions on our ability to pay cash
dividends. It is the policy of the Federal Reserve Board that
bank holding companies should pay cash dividends on common stock
only out of net income available over the past year and only if
prospective earnings retention is consistent with the
organizations expected future needs and financial
condition. The policy provides that bank holding companies
should not maintain a level of cash dividends that undermines
the bank holding companys ability to serve as a source of
strength to its banking subsidiaries. For a foreseeable period
of time, our principal source of cash will be dividends paid by
our bank subsidiaries with respect to their capital stock. There
are certain restrictions on the payment of these dividends
imposed by federal banking laws, regulations and authorities.
See Supervision and Regulation  Payment of
Dividends.

Additionally, before any dividend may be paid on our common
stock in any year, dividends of $0.25 per share must first
be paid on our Class A preferred stock and $0.57 per
share paid on our Class B preferred stock. We are also
restricted from paying dividends on our common stock if we have
deferred payments of interest, or if a default has occurred, on
our subordinated debentures.

As of March 31, 2006, no significant funds were available
for payment of dividends by our bank subsidiaries to us under
applicable regulatory restrictions, without regulatory approval.
Regulatory authorities could impose administratively stricter
limitations on the ability of our bank subsidiaries to pay
dividends to us if such limits were deemed appropriate to
preserve certain capital adequacy requirements. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations.

The following table shows our consolidated capitalization as of
March 31, 2006. Our capitalization is presented on an
actual basis and on an as adjusted basis to give effect to the
sale of 2,500,000 shares of common stock offered in this
offering, less the underwriting discount, commissions and
estimated expenses, at an assumed offering price of
$17.00 per share (the mid-point of the price range set
forth on the cover page of this prospectus). This table should
be read in conjunction with Managements Discussion
and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and
the related notes included in this prospectus.

As adjusted to give effect to the assumed issuance of
2,500,000 shares of common stock.

(2)

Excludes FHLB advances, which were approximately
$123.2 million as of March 31, 2006.

(3)

Consists of long-term debt and total shareholders equity.

(4)

Tangible calculations eliminate the effect of goodwill and
acquisition-related intangible assets and the corresponding
amortization expense on a tax-effected basis. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations 
Table 24, on page 58, for the non-GAAP tabular
reconciliation.

(5)

Leverage ratio is Tier 1 capital to quarterly average total
assets less intangible assets and gross unrealized gains/losses
on available-for-sale investment securities.

If you invest in our common stock in this offering, your
ownership interest in Home BancShares will be diluted to the
extent of the difference between the initial public offering
price per share and the pro forma net tangible book value per
share after this offering. Net tangible book value per share is
determined by dividing our tangible net worth (net tangible
assets less total liabilities) by the number of shares
outstanding. Our net tangible book value as of March 31,
2006, was $120.7 million, or $8.45 per share, based on
the number of shares of common stock outstanding plus the
conversion of preferred stock to common stock as of
March 31, 2006.

After giving effect to our sale of shares in this offering at an
assumed initial public offering price of $17.00 per share
(the midpoint of the range set forth on the cover page of this
prospectus), assuming the underwriters over-allotment
option is not exercised, and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us, our common stock net tangible book value
as of March 31, 2006, would have been $159.5 million,
or $9.50 per share. This represents an immediate increase
in net tangible book value to present common shareholders of
$1.05 per share and an immediate dilution in net tangible
book value of $7.50 per share to new investors purchasing
shares in this offering at the assumed initial public offering
price. Dilution is determined by subtracting pro forma net
tangible book value per common share after this offering from
the assumed initial offering price of $17.00 per common
share.

The following table illustrates the dilution on a
per-common-share basis (with preferred stock converted to common
stock) as of March 31, 2006:

Assumed initial public offering price

$

17.00

Net tangible book value prior to offering

$

8.45

Increase in net tangible book value attributable to new investors

1.05

Pro forma net tangible book value after offering

9.50

Dilution to new investors

$

7.50

The following table summarizes the total number of shares (with
preferred stock converted to common stock), the total
consideration paid to us and the average price paid per share by
existing shareholders and new investors purchasing common stock
in this offering. This information is presented on a pro forma
basis as of March 31, 2006, after giving effect to the sale
of the 2,500,000 shares of common stock in this offering at
an assumed initial public offering price of $17.00 per
share (the midpoint of the range set forth on the cover page of
this prospectus).

Shares Purchased

Total Consideration

Average Price

Number

Percent

Amount(1)

Percent(1)

Per Share(1)

(Dollars in thousands, except per share amounts)

Shares previously issued

14,289,276

85.1

%

$

146,782

77.5

%

$

10.27

Shares issued in this offering

2,500,000

14.9

42,500

22.5

17.00

Total

16,789,276

100.0

%

$

189,282

100.0

%

$

11.27

(1)

Before deducting underwriting discounts and commissions of
approximately $3.0 million and estimated offering expenses
of approximately $798,000. In addition, this table does not
reflect the exercise of any outstanding stock options. As of
March 31, 2006, there were options outstanding under our
stock option plan to purchase a total of 968,244 shares of
common stock with a weighted average exercise price of
$11.22 per share; options outstanding to purchase a total
of 11,703 shares of Class A preferred stock with a
weighted average exercise price of $6.84 per share (which
can convert into 9,239 shares of common stock with a
weighted average price of $8.66 per share); and options
outstanding to purchase a total of 23,827 shares of
Class B preferred stock with a weighted average exercise
price of $19.09 per share (which can convert into
71,481 shares of common stock with a weighted average price
of $6.36 per share).

The following unaudited pro forma condensed combined statement
of income for the year ended December 31, 2005, combines
the historical income statements of Home BancShares with Marine
Bancorp, Inc. and Mountain View Bancshares, Inc. after giving
effect to our acquisitions of Marine Bancorp on June 1,
2005, and Mountain View Bancshares on September 1, 2005.

The pro forma adjustments to the statement of income are
computed as if the transactions occurred on January 1,
2005. This unaudited pro forma statement was prepared giving
effect to the purchase accounting adjustments and other
assumptions described in the accompanying notes. Pro forma
balance sheet data is not provided, as our audited consolidated
balance sheet as of December 31, 2005, included elsewhere
in this prospectus, gives full effect to the Marine Bancorp and
Mountain View Bancshares acquisitions.

The unaudited pro forma condensed combined statement of income
reflects pro forma adjustments that are described in the
accompanying notes and are based on available information and
certain assumptions we believe are reasonable but are subject to
change. We have made, in our opinion, all adjustments that are
necessary to present fairly the pro forma information. The
unaudited condensed combined statement of income does not
purport to represent what our actual results of operations or
financial position would have been if our acquisitions of Marine
Bancorp and Mountain View Bancshares had occurred on
January 1, 2005, or to project our results of operations or
financial position for any future period.

This adjustment reflects the reduction in interest income that
would result from the sale of $34.2 million of securities
to fund our purchase of Marine Bancorp and Mountain View
Bancshares for the five and eight months, respectively, prior to
their acquisition by us. An average rate of 3.87% was used based
on the yield of the securities sold.

(2)

This adjustment reflects additional interest expense on
subordinated debentures for the eight months prior to the
acquisition of Mountain View Bancshares. An average rate of
6.81% was used based on the additional $15.0 million of
subordinated debenture issued during 2005.

(3)

This adjustment reflects the amortization expense for Marine
Bancorp and Mountain View Bancshares core deposit intangible
assets for the five and eight months, respectively, prior to
their acquisitions by us.

(4)

This adjustment reflects the estimated tax effect of the pro
forma adjustments using a marginal 39.23% tax rate.

(5)

This adjustment reflects the estimated tax effect of the
conversion of Mountain View Bancshares from an
S corporation to a C corporation tax filer using an
estimated effective tax rate of 16.56%. The estimated effective
tax rate is low due to the relatively high level of investments
in municipal securities owned by Bank of Mountain View.

The following discussion and analysis presents our
consolidated financial condition and results of operations for
the three months ended March 31, 2006 and 2005, and for the
years ended December 31, 2005, 2004 and 2003. This
discussion should be read together with the Summary
Consolidated Financial Data, our financial statements and
the notes thereto, and other financial data included in this
prospectus. In addition to the historical information provided
below, we have made certain estimates and forward-looking
statements that involve risks and uncertainties. Our actual
results could differ significantly from those anticipated in
these estimates and in the forward-looking statements as a
result of certain factors, including those discussed in the
section of this prospectus captioned Risk Factors,
beginning on page 9, and elsewhere in this prospectus.

General

We are a financial holding company headquartered in Conway,
Arkansas, offering a broad array of financial services through
our five wholly owned bank subsidiaries. As of March 31,
2006, we had, on a consolidated basis, total assets of
$2.0 billion, loans receivable of $1.2 billion, total
deposits of $1.5 billion, and shareholders equity of
$169.0 million. As of December 31, 2005, we had, on a
consolidated basis, total assets of $1.9 billion, loans
receivable of $1.2 billion, total deposits of
$1.4 billion, and shareholders equity of
$165.9 million.

We generate most of our revenue from interest on loans and
investments, service charges, and mortgage banking income.
Deposits are our primary source of funding. Our largest expenses
are interest on these deposits and salaries and related employee
benefits. We measure our performance by calculating our return
on average equity, return on average assets, and net interest
margin. We also measure our performance by our efficiency ratio,
which is calculated by dividing non-interest expense less
amortization of core deposit intangibles by the sum of net
interest income on a tax equivalent basis and non-interest
income.

Key Financial Measures

As of or for the Three

Months Ended March 31,

As of or for the Years Ended December 31,

2006

2005

2005

2004

2003

(Dollars in thousands, except per share data)

Total assets

$

1,970,910

$

1,422,652

$

1,911,491

$

805,186

$

803,103

Loans receivable

1,246,146

806,633

1,204,589

516,655

500,055

Total deposits

1,507,443

1,046,097

1,427,108

552,878

572,218

Net income

3,516

2,189

11,446

9,159

3,769

Basic earnings per share

$

0.28

$

0.18

$

0.92

$

1.08

$

0.66

Diluted earnings per share

0.24

0.16

0.82

0.94

0.63

Diluted cash earnings per share(1)

0.26

0.18

0.89

0.98

0.64

Net interest margin(2)

3.53

%

3.22

%

3.37

%

3.75

%

3.47

%

Efficiency ratio

66.68

65.86

64.94

57.65

64.61

Return on average assets(2)

0.74

0.63

0.69

1.17

0.85

Return on average equity(2)

8.51

5.89

7.27

8.61

8.88

(1)

See Table 20 Diluted Cash Earnings Per Share for a
reconciliation to GAAP for diluted cash earnings per share.

(2)

Annualized for March 31.

2006 First Quarter Operating Performance

Our net income increased $1.3 million, or 60.6%, to
$3.5 million for the three-month period ended
March 31, 2006, from $2.2 million for the same period
in 2005. On a diluted earnings per share basis, our net

earnings increased 50.0% to $0.24 for the three-month period
ended March 31, 2006, as compared to $0.16 for the same
period in 2005. The increase in earnings is primarily associated
with our acquisitions of Marine Bancorp, Inc. and Mountain View
Bancshares during the second and third quarters of 2005,
respectively, combined with organic growth of our bank
subsidiaries.

For the quarter, our annualized return on average equity was
8.51%, our annualized return on average assets was 0.74%, our
annualized net interest margin was 3.53%, and our efficiency
ratio was 66.68%.

2005 Overview

Our net income increased $2.3 million, or 25.0%, to
$11.4 million for the year ended December 31, 2005,
from $9.2 million for the same period in 2004. The increase
in earnings is primarily associated with our acquisitions during
2005, combined with organic growth of our bank
subsidiaries earnings. In 2004, our net income included a
gain on the sale of our equity investment in Russellville
Bancshares. Excluding this after-tax gain of $2.7 million,
net income for 2005 would have increased by $5.0 million,
or 75.4%, over 2004. Diluted earnings per share decreased $0.12,
or 12.8%, to $0.82 for the year ended December 31, 2005,
from $0.94 for 2004. This decrease was primarily the result of
the gain of $0.27 per diluted share during 2004, and a
42.0% increase in the average diluted shares outstanding for the
year ended December 31, 2005, versus the same period in
2004, resulting from the shares issued in connection with our
2005 acquisitions. Excluding the gain, diluted earnings per
share would have increased $0.15, or 22.4%, to $0.82 per
diluted share for the year ended December 31, 2005, from
$0.67 per diluted share for 2004.

Our return on average equity was 7.27% for the year ended
December 31, 2005, compared to 8.61% for 2004. The decrease
was primarily due to: (i) the $59.2 million, or 55.6%,
increase in shareholders equity to $165.9 million as
of December 31, 2005, compared to $106.6 million as of
December 31, 2004; and (ii) a gain of
$2.7 million in 2004. Return on average equity for 2004
would have been 6.07%, excluding this gain. The increase in
shareholders equity was primarily due to the acquisitions
of TCBancorp and Marine Bancorp.

Our return on average assets was 0.69% for the year ended
December 31, 2005, compared to 1.17% for 2004. The decrease
was primarily due to: (i) the $1.1 billion, or 137.4%,
increase in total assets to $1.9 billion as of
December 31, 2005, compared to $805.2 million as of
December 31, 2004; and (ii) a gain of
$2.7 million in 2004. Return on average assets would have
been 0.83% excluding this gain. The increase in total assets was
primarily due to the acquisitions of TCBancorp, Marine Bancorp,
and Mountain View Bancshares.

Our net interest margin was 3.37% for the year ended
December 31, 2005, compared to 3.75% for 2004. The decrease
was primarily due to the relatively lower net interest margin of
2.77% for Twin City Bank for the year ended December 31,
2005.

Our efficiency ratio (calculated by dividing non-interest
expense less amortization of core deposit intangibles by the sum
of net interest income on a tax equivalent basis and
non-interest income) was 64.94% for the year ended
December 31, 2005, compared to 57.65% for 2004. The
efficiency ratio for 2004 would have been 64.06% excluding our
gain of $2.7 million.

Our total assets increased $1.1 billion, or 137.4%, to
$1.9 billion as of December 31, 2005, compared to
$805.2 million as of December 31, 2004. Our loan
portfolio increased $687.9 million, or 133.2%, to
$1.2 billion as of December 31, 2005, from
$516.7 million as of December 31, 2004.
Shareholders equity increased $59.2 million, or
55.6%, to $165.9 million as of December 31, 2005, from
$106.6 million as of December 31, 2004. All of these
increases were primarily associated with our acquisitions during
2005.

As of December 31, 2005, our asset quality improved as
non-performing loans declined to $8.3 million, or 0.69%, of
total loans from $9.0 million, or 1.73%, of total loans as
of the prior year end. The allowance for loan losses as a
percent of non-performing loans improved to 291.6% as of
December 31, 2005, compared to 182.4% from the prior year
end. These ratios reflect the continuing commitment of our
management to maintain sound asset quality.

Overview. We prepare our consolidated financial
statements based on the selection of certain accounting
policies, generally accepted accounting principles and customary
practices in the banking industry. These policies, in certain
areas, require us to make significant estimates and assumptions.
Our accounting policies are described in detail in the notes to
our consolidated financial statements included as part of this
prospectus.

We consider a policy critical if (i) the accounting
estimate requires assumptions about matters that are highly
uncertain at the time of the accounting estimate; and
(ii) different estimates that could reasonably have been
used in the current period, or changes in the accounting
estimate that are reasonably likely to occur from period to
period, would have a material impact on our financial
statements. Using these criteria, we believe that the accounting
policies most critical to us are those associated with our
lending practices, including the accounting for the allowance
for loan losses, intangible assets and income taxes.

Investments. Securities available for sale are reported
at fair value with unrealized holding gains and losses reported
as a separate component of shareholders equity and other
comprehensive income (loss). Securities that are held as
available for sale are used as a part of our asset/liability
management strategy. Securities that may be sold in response to
interest rate changes, changes in prepayment risk, the need to
increase regulatory capital, and other similar factors are
classified as available for sale.

Loans Receivable and Allowance for Loan Losses.
Substantially all of our loans receivable are reported at their
outstanding principal balance adjusted for any charge-offs, as
it is managements intent to hold them for the foreseeable
future or until maturity or payoff. Interest income on loans is
accrued over the term of the loans based on the principal
balance outstanding.

The allowance for loan losses is established through a provision
for loan losses charged against income. The allowance represents
an amount that, in managements judgment, will be adequate
to absorb probable credit losses on identifiable loans that may
become uncollectible and probable credit losses inherent in the
remainder of the loan portfolio. The amounts of provisions for
loan losses are based on managements analysis and
evaluation of the loan portfolio for identification of problem
credits, internal and external factors that may affect
collectibility, relevant credit exposure, particular risks
inherent in different kinds of lending, current collateral
values and other relevant factors.

We consider a loan to be impaired when, based on current
information and events, it is probable that we will be unable to
collect all amounts due according to the contractual terms
thereof. We apply this policy even if delays or shortfalls in
payments are expected to be insignificant. All non-accrual loans
and all loans that have been restructured from their original
contractual terms are considered impaired loans. The aggregate
amount of impaired loans is used in evaluating the adequacy of
the allowance for loan losses and amount of provisions thereto.
Losses on impaired loans are charged against the allowance for
loan losses when in the process of collection it appears likely
that losses will be realized. The accrual of interest on
impaired loans is discontinued when, in managements
opinion, the borrower may be unable to meet payments as they
become due. When accrual of interest is discontinued, all unpaid
accrued interest is reversed.

Loans are placed on non-accrual status when management believes
that the borrowers financial condition, after giving
consideration to economic and business conditions and collection
efforts, is such that collection of interest is doubtful, or
generally when loans are 90 days or more past due. Loans
are charged against the allowance for loan losses when
management believes that the collectibility of the principal is
unlikely. Accrued interest related to non-accrual loans is
generally charged against the allowance for loan losses when
accrued in prior years and reversed from interest income if
accrued in the current year. Interest income on non-accrual
loans may be recognized to the extent cash payments are
received, although the majority of payments received are usually
applied to principal. Non-accrual loans are generally returned
to accrual status when principal and interest payments are less
than 90 days past due, the customer has made required
payments for at least six months, and we reasonably expect to
collect all principal and interest.

valuation specialists. The core deposit intangibles are being
amortized over 84 to 114 months on a straight-line basis.
Goodwill is not amortized but rather is evaluated for impairment
on at least an annual basis. We perform an annual impairment
test of goodwill as required by SFAS No. 142,
Goodwill and Other Intangible Assets, in the fourth
quarter. No impairment of our goodwill has resulted from these
annual impairment tests.

Income Taxes. We use the liability method in accounting
for income taxes. Under this method, deferred tax assets and
liabilities are determined based upon the difference between the
values of the assets and liabilities as reflected in the
financial statements and their related tax basis using enacted
tax rates in effect for the year in which the differences are
expected to be recovered or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes. Any estimated
tax exposure items identified would be considered in a tax
contingency reserve. Changes in any tax contingency reserve
would be based on specific development, events, or transactions.

We and our subsidiaries file consolidated tax returns. Our
subsidiaries provide for income taxes on a separate return
basis, and remit to us amounts determined to be currently
payable.

Stock Options. Prior to 2006, we elected to follow
Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25), and related
interpretations in accounting for employee stock options using
the fair value method. Under APB 25, because the exercise
price of the options equals the estimated market price of the
stock on the issuance date, no compensation expense is recorded.
On January 1, 2006, we adopted SFAS No. 123,
Share-Based Payment (Revised 2004) which establishes
standards for the accounting for transactions in which an entity
(i) exchanges its equity instruments for goods and
services, or (ii) incurs liabilities in exchange for goods
and services that are based on the fair value of the
entitys equity instruments or that may be settled by the
issuance of the equity instruments. SFAS 123R eliminates
the ability to account for stock-based compensation using
APB 25 and requires that such transactions be recognized as
compensation cost in the income statement based on their fair
values on the measurement date, which is generally the date of
the grant.

Acquisitions and Equity Investments

On September 1, 2005, we acquired Mountain View Bancshares,
Inc., an Arkansas bank holding company. Mountain View Bancshares
owned The Bank of Mountain View, located in Mountain View,
Arkansas which had total assets of $202.5 million, loans of
$68.8 million and total deposits of $158.0 million on
the date of the acquisition. The consideration for the merger
was $44.1 million, which was paid approximately 90%, or
$39.8 million, in cash and 10%, or $4.3 million, in
shares of our common stock. As a result of this transaction, we
recorded goodwill of $13.2 million and a core deposit
intangible of $3.0 million.

On June 1, 2005, we acquired Marine Bancorp, Inc., a
Florida bank holding company. Marine Bancorp owned Marine Bank
of the Florida Keys (subsequently renamed Marine Bank), located
in Marathon, Florida, which had total assets of
$257.6 million, loans of $215.2 million and total
deposits of $200.7 million on the date of the acquisition.
We also assumed debt obligations with carrying values of
$39.7 million, which approximated their fair market values
because the rates being paid on the obligations were at or near
estimated current market rates. The consideration for the merger
was $15.6 million comprised of approximately 60.5%, or
$9.4 million, in cash and 39.5%, or $6.2 million, in
shares of our Class B preferred stock. As a result of this
transaction, we recorded goodwill of $4.6 million and a
core deposit intangible of $2.0 million.

On January 3, 2005, we purchased 20% of the common stock of
White River Bancshares, Inc. of Fayetteville, Arkansas for
$9.1 million. White River Bancshares is a newly formed
corporation, which owns all of the stock of Signature Bank of
Arkansas, with branch locations in northwest Arkansas. As of
December 31, 2005, White River Bancshares had total assets
of $184.7 million, loans of $131.3 million, and total
deposits of $130.3 million. In January 2006, White River
Bancshares issued an additional $15.0 million of common
stock. To maintain our 20% ownership, we invested an additional
$3.0 million in White River Bancshares at that time.

Effective January 1, 2005, we purchased the remaining 67.8%
of TCBancorp that we did not previously own. TCBancorp owned
Twin City Bank, with branch locations in the Little Rock/ North
Little Rock

metropolitan area. The purchase brought our ownership of
TCBancorp to 100%. TCBancorp had total assets of
$633.4 million, loans of $261.9 million and total
deposits of $500.1 million at the effective date of the
acquisition. We also assumed debt obligations with carrying
values of $20.9 million, which approximated their fair
market values because the rates being paid on the obligations
were at or near estimated current market rates. The purchase
price for the TCBancorp acquisition was $43.9 million,
which consisted of approximately $110,000 of cash and the
issuance of 3,750,813 shares (split adjusted) of our common
stock. As a result of this transaction, we recorded goodwill of
$1.1 million and a core deposit intangible of
$3.3 million. This transaction also increased our ownership
of CB Bancorp and FirsTrust Financial Services to 100%,
both of which we had previously
co-owned with TCBancorp.

On December 1, 2003, we used CB Bancorp (an
acquisition subsidiary that we formed and
co-owned, on an 80/20
basis, with TCBancorp) to purchase Community Financial Group,
Inc. and its bank subsidiary, Community Bank. Community Bank had
total assets of $326.2 million, loans of
$199.5 million and total deposits of $279.6 million at
the date of the acquisition. The purchase price for the
Community Financial Group acquisition was $43.0 million and
consisted of cash of $12.6 million from Home BancShares and
$8.6 million from TCBancorp, and 2,176,291 shares of
our Class A preferred stock at a value of $10 per
share. We recorded goodwill of $18.6 million and a core
deposit intangible of $5.0 million.

On March 4, 2004, we sold one of the acquired branches of
Community Bank to TCBancorp, which included loans of
$5.9 million and deposits of $17.1 million. The
negotiated purchase price for the branch was to equal 8% of the
closing deposits sold plus the fair value of the physical
assets. At the time of acquisition, the loans and deposits that
were to be sold with the branch had not been identified. This is
primarily due to the fact that the branch was in close proximity
to the other branches of Community Bank. Community Bank had nine
branches at the time of acquisition, all of which were within a
30-mile radius of each
other. As a result, Community Bank had to review each one of its
customers using that branch to determine which customers should
be allocated to the branch to be sold. This process was not
completed until February 2004. The amount of assets held for
sale to TCBancorp as of December 31, 2003 was immaterial to
our financial position.

In February 2005, CB Bancorp merged into Home BancShares,
and Community Bank thus became our wholly owned subsidiary.

Sale of Equity Investment in Russellville Bancshares

On September 3, 2004, Russellville Bancshares repurchased
the 21.7% equity interest that we had originally acquired in
2001. As a result of this sale, we recorded a pre-tax gain of
$4.4 million or an after-tax gain of $2.7 million.
This gain increased diluted earnings per share by $0.27 for the
year ended December 31, 2004.

Excluding the gain associated with the sale of our interest in
Russellville Bancshares, our net income for the year ended
December 31, 2004, was $6.5 million, or $0.67 diluted
earnings per share.

Results of Operations for the Three Months Ended
March 31, 2006 and 2005, and the Years Ended
December 31, 2005, 2004 and 2003

Performance Summary for the Three Months Ended March 31,
2006 and 2005. Our net income increased $1.3 million,
or 60.6%, to $3.5 million for the three-month period ended
March 31, 2006, from $2.2 million for the same period
in 2005. On a diluted earnings per share basis, our net earnings
increased 50.0% to $0.24 for the three-month period ended
March 31, 2006, as compared to $0.16 for the same period in
2005. The increase in earnings is primarily associated with our
acquisitions of Marine Bancorp, Inc. and Mountain View
Bancshares during the second and third quarters of 2005,
respectively, combined with organic growth of our bank
subsidiaries.

Performance Summary for the Years Ended December 31,
2005, 2004 and 2003. Our net income increased
$2.3 million, or 25.0%, to $11.4 million for the year
ended December 31, 2005, from $9.2 million for 2004.
Our net income increased $5.4 million, or 143.0%, to
$9.2 million for the year ended December 31, 2004,
from $3.8 million for 2003. The increase in earnings is
primarily associated with our acquisitions during

2005, combined with organic growth of our bank subsidiaries. In
2004, our net income included a gain on the sale of our equity
investment in Russellville Bancshares. Excluding this after-tax
gain of $2.7 million, net income for 2005 would have
increased $5.0 million, or 75.4%. The increase in our net
income for 2004 as compared to 2003 resulted from: (i) our
acquisition of Community Financial Group in December 2003;
(ii) a gain of $2.7 million in 2004; and
(iii) the organic growth of our bank subsidiaries
earnings.

On a diluted earnings per share basis, our net earnings were
$0.82 for 2005, as compared to $0.94 for 2004 and $0.63 for
2003. The decrease in diluted earnings per share for 2005 is
primarily due to the effect of a after-tax gain of
$0.27 per diluted share from the sale of our equity
ownership in Russellville Bancshares during the third quarter of
2004, and a 42.0% increase in the average diluted shares
outstanding for the year ended December 31, 2005, versus
the same period in 2004. This increase in average diluted shares
was the result of the shares issued in connections with our
acquisitions in 2005.

Net Interest Income. Net interest income, our principal
source of earnings, is the difference between the interest
income generated by earning assets and the total interest cost
of the deposits and borrowings obtained to fund those assets.
Factors affecting the level of net interest income include the
volume of earning assets and interest-bearing liabilities,
yields earned on loans and investments and rates paid on
deposits and other borrowings, the level of non-performing loans
and the amount of non-interest-bearing liabilities supporting
earning assets. Net interest income is analyzed in the
discussion and tables below on a fully taxable equivalent basis.
The adjustment to convert certain income to a fully taxable
equivalent basis consists of dividing tax-exempt income by one
minus the combined federal and state income tax rate.

Net interest income on a fully taxable equivalent basis
increased $5.0 million, or 48.7%, to $15.4 million for
the three-month period ended March 31, 2006, from
$10.4 million for the same period in 2005. This increase in
net interest income was the result of an $11.6 million
increase in interest income offset by $6.6 million increase
in interest expense. The $11.6 million increase in interest
income was primarily the result of a $456.0 million
increase in average earning assets associated with our
acquisitions of Marine Bancorp, Inc. and Mountain View
Bancshares, Inc. during the second and third quarter of 2005,
respectively, combined with higher short-term interest rates as
a result of the rising rate environment. The higher level of
earning assets resulted in an improvement in interest income of
$7.9 million, and the rising rate environment resulted in a
$3.7 million increase in interest income for the
three-month period ended March 31, 2006. The
$6.6 million increase in interest expense for the
three-month period ended March 31, 2006, is primarily the
result of a $382.6 million increase in average
interest-bearing liabilities associated with our acquisitions of
Marine Bancorp, Inc. and Mountain View Bancshares, Inc. during
the second and third quarter of 2005, respectively, combined
with higher interest rates during 2005 as a result of the rising
rate environment. The higher level of interest-bearing
liabilities resulted in additional interest expense of
$3.0 million. The rising rate environment resulted in a
$3.6 million increase in interest expense for the
three-month period ended March 31, 2006.

Net interest income on a fully taxable equivalent basis
increased $25.3 million, or 97.3%, to $51.2 million
for the year ended December 31, 2005, from
$26.0 million for 2004. This increase in net interest
income was the result of a $49.7 million increase in
interest income offset by $24.4 million increase in
interest expense. The $49.7 million increase in interest
income for the year ended December 31, 2005, is primarily
the result of a $788.5 million increase in average earning
assets associated with our acquisitions during 2005, combined
with higher short-term interest rates as a result of the rising
rate environment. The higher level of earning assets resulted in
an improvement in interest income of $46.3 million. The
rising rate environment resulted in a $3.4 million increase
in interest income during 2005. The $24.4 million increase
in interest expense for the year ended December 31, 2005,
is primarily the result of a $686.5 million increase in
average interest-bearing liabilities associated with our
acquisitions during 2005, combined with higher interest rates
during 2005 as a result of the rising rate environment. The
higher level of interest-bearing liabilities resulted in
additional interest expense of $17.3 million. The rising
rate environment resulted in a $7.1 million increase in
interest expense during 2005.

Net interest income on a fully taxable equivalent basis
increased $12.6 million, or 93.9%, to $26.0 million
for the year ended December 31, 2004, from
$13.4 million for 2003. This increase in net interest
income was the result of a $15.9 million increase in
interest income and a $3.3 million increase in interest
expense. The

$15.9 million increase in interest income for the year
ended December 31, 2004, is primarily the result of a
$307.2 million increase of average earning assets due to
the December 2003 acquisition of Community Financial Group,
combined with our internal growth. The higher level of earning
assets resulted in an improvement in interest income of
$16.3 million. The $3.3 million increase in interest
expense for the year ended December 31, 2004, is primarily
the result of a $228.9 million increase in average
interest-bearing liabilities associated with the acquisition of
Community Financial Group, combined with our internal growth.
The higher level of interest-bearing liabilities resulted in
additional interest expense of $4.2 million.

Tables 1 and 2 reflect an analysis of net interest income on a
fully taxable equivalent basis for the three-month periods ended
March 31, 2006 and 2005, and the years ended
December 31, 2005, 2004 and 2003, as well as changes in
fully taxable equivalent net interest margin for the three-month
period ended March 31, 2006, compared to the same period in
2005, and the years 2005 compared to 2004 and 2004 compared to
2003.

Table 1: Analysis of Net Interest Income

Three Months Ended

March 31,

Years Ended December 31,

2006

2005

2005

2004

2003

(Dollars in thousands)

Interest income

$

27,734

$

16,361

$

85,458

$

36,681

$

21,538

Fully taxable equivalent adjustment

583

343

1,790

874

95

Interest income  fully taxable equivalent

28,317

16,704

87,248

37,555

21,633

Interest expense

12,928

6,355

36,002

11,580

8,240

Net interest income  fully taxable equivalent

$

15,389

$

10,349

$

51,246

$

25,975

$

13,393

Yield on earning assets  fully taxable equivalent

6.50

%

5.20

%

5.74

%

5.42

%

5.61

%

Cost of interest-bearing liabilities

3.39

2.31

2.75

2.00

2.36

Net interest spread  fully taxable equivalent

3.11

2.89

2.99

3.42

3.25

Net interest margin  fully taxable equivalent

3.53

3.22

3.37

3.75

3.47

Table 2: Changes in Fully Taxable Equivalent Net Interest
Margin

December 31,

March 31,

2006 vs. 2005

2005 vs. 2004

2004 vs. 2003

(In thousands)

Increase in interest income due to change in earning assets

$

7,951

$

46,333

$

16,267

Increase (decrease) in interest income due to change in earning
asset yields

3,662

3,360

(344

)

Increase in interest expense due to change in interest-bearing
liabilities

3,032

17,339

4,166

Increase (decrease) in interest expense due to change in
interest rates paid on interest-bearing liabilities

Table 3 shows, for each major category of earning assets and
interest-bearing liabilities, the average amount outstanding,
the interest income or expense on that amount and the average
rate earned or expensed for the three-month periods ended
March 31, 2006 and 2005, and the years ended
December 31, 2005, 2004 and 2003. The table also shows the
average rate earned on all earning assets, the average rate
expensed on all interest-bearing liabilities, the net interest
spread and the net interest margin for the same periods. The
analysis is presented on a fully taxable equivalent basis.
Non-accrual loans were included in average loans for the purpose
of calculating the rate earned on total loans.

Table 4 shows changes in interest income and interest expense
resulting from changes in volume and changes in interest rates
for the three-month period ended March 31, 2006 compared to
the same period in 2005, and the year ended December 31,
2005, compared to 2004, and 2004 compared to 2003, on a fully
taxable basis. The changes in interest rate and volume have been
allocated to changes in average volume and changes in average
rates, in proportion to the relationship of absolute dollar
amounts of the changes in rates and volume.

Provision for Loan Losses. Our management assesses the
adequacy of the allowance for loan losses by applying the
provisions of Statement of Financial Accounting Standards
No. 5 and No. 114. Specific allocations are determined
for loans considered to be impaired and loss factors are
assigned to the remainder of the loan portfolio to determine an
appropriate level in the allowance for loan losses. The
allowance is increased, as necessary, by making a provision for
loan losses. The specific allocations for impaired loans are
assigned based on an estimated net realizable value after a
thorough review of the credit relationship. The potential loss
factors associated with the remainder of the loan portfolio are
based on an internal net loss experience, as well as
managements review of trends within the portfolio and
related industries.

Generally, commercial, commercial real estate, and residential
real estate loans are assigned a level of risk at origination.
Thereafter, these loans are reviewed on a regular basis. The
periodic reviews generally include loan payment and collateral
status, the borrowers financial data, and key ratios such
as cash flows, operating income, liquidity, and leverage. A
material change in the borrowers credit analysis can
result in an increase or decrease in the loans assigned
risk grade. Aggregate dollar volume by risk grade is monitored
on an ongoing basis.

Our management reviews certain key loan quality indicators on a
monthly basis, including current economic conditions,
delinquency trends and ratios, portfolio mix changes, and other
information management deems necessary. This review process
provides a degree of objective measurement that is used in
conjunction with periodic internal evaluations. To the extent
that this review process yields differences between estimated
and actual observed losses, adjustments are made to the loss
factors used to determine the appropriate level of the allowance
for loan losses.

The provision for loan losses represents managements
determination of the amount necessary to be charged against the
current periods earnings, to maintain the allowance for
loan losses at a level that is considered adequate in relation
to the estimated risk inherent in the loan portfolio. The
provision was $484,000 for the three-month period ended
March 31, 2006, $3.8 million for the year ended
December 31, 2005, $2.3 million for 2004, and $807,000
for 2003.

Our provision for loan losses decreased $567,000, or 53.9%, to
$484,000 for the three-month period ended March 31, 2006,
from $1.1 million for the same period in 2005. The decrease
in the provision is primarily associated with the decrease in
non-performing loans to $8.2 million as of March 31,
2006 from $10.1 million as of March 31, 2005.

Our provision for loan losses increased $1.5 million, or
67.1%, to $3.8 million for the year ended December 31,
2005, from $2.3 million for 2004. The increase in the
provision is primarily associated with our acquisitions during
2005 as a result of their continued loan growth, combined with a
charge of $450,000 to the provision expense due to Hurricane
Wilma that affected the Florida Keys during the fourth quarter
of 2005. This expense was established based on managements
best estimate of the hurricanes impact on the loan
portfolio using currently available information. It is too early
to determine with certainty the full extent of the impact,
therefore the estimate is based on judgment and subject to
change. Management will continue to carefully assess and review
the exposure of the loan portfolio to hurricane-related factors.

Our provision increased $1.5 million, or 183.8%, to
$2.3 million for the year ended December 31, 2004,
from $807,000 in 2003. The increase in the provision is
primarily associated with the acquisition of Community Financial
Group during the fourth quarter of 2003, combined with losses
related to a former loan officers portfolio. The loans
originated by the former loan officer were primarily
agricultural and related farmland, and involved inadequate
underwriting and excessive policy exceptions, among other issues.

Non-Interest Income. Total non-interest income was
$4.4 million for the three-month period ended
March 31, 2006 compared to $3.8 million for the same
period in 2005. Total non-interest income was $15.7 million
in 2005, compared to $18.1 million in 2004 and
$6.7 million in 2003. Our non-interest income includes
service charges on deposit accounts, other service charges and
fees, trust fees, data processing fees, mortgage banking income,
insurance commissions, income from title services, equity in
income of unconsolidated affiliates and other income.

Table 5 measures the various components of our non-interest
income for the three-month period ended March 31, 2006 and
2005 and the years ended December 31, 2005, 2004, and 2003,
respectively, as well as changes for the three-month period
ended March 31, 2006 compared to the same period in 2005,
and the years 2005 compared to 2004 and 2004 compared to 2003.

Non-interest income increased $588,000, or 15.4%, to
$4.4 million for the three-month period ended
March 31, 2006 from $3.8 million for the same period
in 2005. The primary factors that resulted in the increase
include:



The $533,000 aggregate increase in service charges on deposit
accounts and other service charges and fees was primarily a
result of our acquisitions of Marine Bancorp and Mountain View
Bancshares in the second and third quarters of 2005,
respectively, combined with organic growth of our other bank
subsidiaries service charges.



The $87,000 increase in data processing fees was related to the
data processing fees associated with White River Bancshares,
which began banking operations in May 2005.



The $119,000 increase in mortgage banking revenue was primarily
the result of the acquisition of Marine Bancorp in the second
quarter of 2005.



The $170,000 aggregate increase in trust fees, insurance
commissions and title fees was primarily a result of our organic
growth in those product lines.



The equity in loss of unconsolidated affiliate of $116,000 is
related to the 20% interest in White River Bancshares that we
purchased during 2005. Because the investment in White River
Bancshares is accounted for on the equity method, we recorded
our share of White River Bancshares operating loss.



The $153,000 decrease in the gain on securities and loans
between March 31, 2005 and March 31, 2006 is primarily
related to gains resulting from the sale of SBA loan products
originated by us. The gain from the sale of SBA loans was
$34,000 for the
three-month period
ended March 31, 2006, compared to $230,000 for the same
period in 2005.

Non-interest income decreased $2.4 million, or 13.3%, to
$15.7 million for the year ended December 31, 2005
from $18.1 million in 2004. The primary factors that
resulted in the decrease from 2004 to 2005 include:



The $3.8 million aggregate increase in service charges on
deposit accounts, other service charges and fees, and trust fees
was primarily a result of our acquisitions during 2005, combined
with organic growth of our bank subsidiaries earnings.

The $896,000 decrease in data processing fees was primarily
associated with the acquisition of TCBancorp. Prior to acquiring
complete ownership of TCBancorp, we performed its data
processing functions and received fees for this service. We
continue to receive data processing fees from White River
Bancshares and certain other non-affiliated banks.



The rising interest rate environment during 2005 resulted in
decreased mortgage production volumes for the mortgage industry
as compared to 2004. While we experienced an increase of
$463,000 in this revenue source, the increase primarily resulted
from the additional $757,000 mortgage banking revenues
associated with the acquisitions of TCBancorp and Marine Bancorp
during 2005.



The $287,000 decrease in title fees is primarily associated with
lower demand for title fees as a result of the decrease in
mortgage production volume associated with the rising interest
rate environment in 2005.



The $2.2 million decrease in equity in income of
unconsolidated affiliates is the result of acquiring 100%
ownership in TCBancorp effective as of January 1, 2005,
combined with the $592,000 loss associated with the 20% interest
in White River Bancshares that we purchased during 2005. Because
the investment in White River Bancshares is accounted for on the
equity method, we recorded our share of White River
Bancshares operating loss. White River Bancshares is
currently operating at a loss as a result of their status as a
start-up entity.



The $3.9 million decrease in gain on sale of equity
investment for 2005 is primarily associated with a
$4.4 million pre-tax gain recorded in the third quarter of
2004 from the sale of our equity ownership in Russellville
Bancshares. During the third quarter of 2005, we recognized a
$465,000 gain on sale of an equity investment. This gain was
deferred as a result of our financing the purchase price for
this transaction. The gain became recognizable during 2005 as a
result of the financing being paid off.



The difference in the loss on securities and loans between 2004
and 2005 is primarily associated with specific transactions for
each year. During 2004, a loss of $313,000 was recorded for
write-downs for other-than-temporary losses in our investment
portfolio, offset by $64,000 of gains from the sale of
investment securities and a $26,000 gain resulting from the sale
of our SBA loan product. In 2005, we made a strategic decision
to sell lower-yielding investment securities, resulting in a
loss of approximately $539,000. This loss was largely offset by
approximately $529,000 in gains resulting from the sale of our
SBA loan product.



The $300,000 increase in other income is primarily associated
with a $324,000 gain from proceeds associated with fire damage
at one of our branch banking locations during 2005.

Non-interest income increased $11.4 million, or 168.5%, to
$18.1 million for the year ended December 31, 2004,
from $6.7 million in 2003. The increase is primarily
associated with a $4.4 million pre-tax gain from selling
our equity ownership of Russellville Bancshares during the third
quarter of 2004, combined with the Community Financial Group
acquisition and our internal growth. The Community Financial
Group acquisition also included two non-banking subsidiaries,
Community Insurance and Community Title Service, which
provided new sources of non-interest income during 2004.

Table 6 below sets forth a summary of non-interest expense for
the three-month periods ended March 31, 2006 and 2005, and
the years ended December 31, 2005, 2004, and 2003, as well
as changes for the three-month period ended March 31, 2006
compared to the same period in 2005, and the years ended 2005
compared to 2004 and 2004 compared to 2003.

Non-interest expense increased $4.0 million, or 41.3%, to
$13.6 million for the three-month period ended
March 31, 2006, from $9.6 million for the same period
in 2005. The increase is primarily related to our acquisitions
of Marine Bancorp and Mountain View Bancshares in the second and
third quarters of 2005, respectively. The most significant
component of the increase was the $2.1 million increase in
salaries and employee benefits. This $2.1 million increase
was primarily the result of $1.8 million of additional
staffing and $116,000 of options-related expense due to the
adoption of SFAS 123R.

Non-interest expense increased $18.8 million, or 72.0%, to
$44.9 million for the year ended December 31, 2005,
from $26.1 million in 2004. The increase is related to our
acquisitions of TCBancorp, Marine Bancorp and Mountain View
Bancshares combined with a modest increase in staffing,
particularly at the holding company level.

Non-interest expense increased $13.1 million, or 99.9%, to
$26.1 million for the year ended December 31, 2004,
from $13.1 million in 2003. The increase was primarily the
result of our acquisition of Community Financial Group in
December 2003.

Amortization of intangibles expense was $1.5 million for
the year ended December 31, 2005, $728,000 for 2004, and
$63,000 for 2003. The increase was caused by our increase in
core deposit intangibles created when we completed each of our
acquisitions. Including all of the mergers completed, our
estimated amortization of intangibles expense for each of the
following five years is $1.8 million.

Income Taxes. The provision for income taxes increased
$645,000, or 68.4%, to $1.6 million for the three-month
period ended March 31, 2006, from $943,000 as of
March 31, 2005. The provision for income taxes decreased
$95,000, or 1.9%, to $4.9 million for the year ended
December 31, 2005, from $5.0 million in 2004. The
provision for income taxes increased $2.6 million, or
114.7%, to $5.0 million for the year ended
December 31, 2004, from $2.3 million for 2003. The
effective income tax rate was 31.1% for the three-month period
ended March 31, 2006, compared to 30.1% for the same period
in 2005. The effective tax rate for the years ended
December 31, 2005, 2004 and 2003 were 30.1%, 34.1%, and
38.0%, respectively. The declining

effective income tax rates for the years ended are primarily
associated with the lower effective income tax rates associated
with the acquisitions of Community Financial Group, TCBancorp,
and Mountain View Bancshares.

Financial Conditions as of and for the Quarters Ended
March 31, 2006 and 2005 and the Years Ended
December 31, 2005 and 2004

Our total assets increased $59.4 million, or 3.1%, to
$2.0 billion as of March 31, 2006, from
$1.9 billion as of December 31, 2005. Our loan
portfolio increased $41.6 million, or 3.4%, to
$1.2 billion as of March 31, 2006, from
December 31, 2005. Shareholders equity increased
$3.2 million, or 1.9%, to $169.0 million as of
March 31, 2006, compared to $165.9 million as of
December 31, 2005. All of these increases are primarily
associated with organic growth of our bank subsidiaries.

Our total assets increased $1.1 billion, or 137.4%, to
$1.9 billion as of December 31, 2005, from
$805.2 million as of December 31, 2004. Our loans
receivable increased $687.9 million, or 133.2%, to
$1.2 billion as of December 31, 2005, from
$516.7 million as of December 31, 2004.
Shareholders equity increased $59.2 million, or
55.6%, to $165.9 million as of December 31, 2005,
compared to $106.6 million as of December 31, 2004.
All of these increases resulted from organic growth.

Loan Portfolio

Our loan portfolio averaged $1.2 billion during the first
quarter of 2006, $1.0 billion during 2005 and
$494.0 million during 2004. Net loans were
$1.2 billion as of March 31, 2006 and
December 31, 2005, compared to $500.3 million as of
December 31, 2004. The most significant components of the
loan portfolio were commercial and residential real estate, real
estate construction, consumer, and commercial and industrial
loans. These loans are primarily originated within our market
areas of central Arkansas, north central Arkansas and the
Florida Keys and are generally secured by residential or
commercial real estate or business or personal property within
our market areas.

Table 7 presents our loan balances by category as of the dates
indicated.

Table 7: Loan Portfolio

As of December 31,

As of March 31,

2006

2005

2004

2003

2002

2001

(In thousands)

Real estate:

Commercial real estate loans:

Non-farm/non-residential

$

422,618

$

411,839

$

181,995

$

173,743

$

91,352

$

69,876

Construction/land development

331,532

291,515

116,935

74,138

37,969

22,834

Agricultural

13,197

13,112

12,912

5,065

5,024

3,651

Residential real estate loans:

Residential 1-4 family

220,273

221,831

86,497

79,246

58,899

49,548

Multifamily residential

36,425

34,939

17,708

16,654

6,255

5,778

Total real estate

1,024,045

973,236

416,047

348,846

199,499

151,687

Consumer

39,599

39,447

24,624

31,546

22,632

25,733

Commercial and industrial

166,025

175,396

69,345

102,350

46,555

47,733

Agricultural

8,287

8,466

6,275

14,409

16,078

10,546

Other

8,190

8,044

364

2,904





Total loans receivable

1,246,146

1,204,589

516,655

500,055

284,764

235,699

Less: Allowance for loan losses

24,435

24,175

16,345

14,717

5,706

3,847

Total loans receivable, net

$

1,221,711

$

1,180,414

$

500,310

$

485,338

$

279,058

$

231,852

Commercial Real Estate Loans. We originate non-farm and
non-residential loans (primarily secured by commercial real
estate), construction/land development loans, and agricultural
loans, which are generally secured by real estate located in our
market areas. As of March 31, 2006, less than 5% of our
loans were made on raw land. Our commercial mortgage loans are
generally collateralized by first liens on real estate and
amortized over a 10 to 20 year period with balloon payments
due at the end of one to five years. These loans are generally
underwritten by addressing cash flow (debt service coverage),
primary and secondary source of repayment, the financial
strength of any guarantor, the strength of the tenant (if any),
the borrowers liquidity and leverage, management
experience, ownership structure, economic conditions and
industry specific trends and collateral. Generally, we will loan
up to 85% of the value of improved property, 65% of the value of
raw land and 75% of the value of land to be acquired and
developed. A first lien on the property and assignment of lease
is required if the collateral is rental property, with second
lien positions considered on a case-by-case basis.

As of March 31, 2006, commercial real estate loans totaled
$767.3 million, or 61.6% of our loan portfolio, compared to
$716.5 million, or 59.5% of our loan portfolio, as of
December 31, 2005. This increase is primarily the result of
organic growth of our loan portfolio and the reclassification of
several large loans, which refinanced during the first quarter
of 2006 and were reclassified into commercial real estate from
commercial and industrial as a result of a change in the
collateral.

As of December 31, 2005, commercial real estate loans
totaled $716.5 million, or 59.5% of our loan portfolio,
compared to $311.8 million, or 60.4% of our loan portfolio,
as of December 31, 2004. This increase is primarily the
result of our acquisitions during 2005, combined with organic
growth of our loan portfolio.

loans generally have a
loan-to-value ratio of
up to 90%. These loans are underwritten by giving consideration
to the borrowers ability to pay, stability of employment
or source of income,
debt-to-income ratio,
credit history and
loan-to-value ratio.

As of March 31, 2006, we had $256.7 million, or 20.6%
of our loan portfolio, in residential real estate loans, which
is comparable to the $256.8 million, or 21.3% of our loan
portfolio, as of December 31, 2005.

As of December 31, 2005, we had $256.8 million, or
21.3% of our loan portfolio, in residential real estate loans
compared to $104.2 million, or 20.2% of our loan portfolio,
as of December 31, 2004. This increase is primarily the
result of our acquisitions during 2005, combined with organic
growth of our loan portfolio.

Consumer Loans. Our consumer loan portfolio is composed
of secured and unsecured loans originated by our banks. The
performance of consumer loans will be affected by the local and
regional economy as well as the rates of personal bankruptcies,
job loss, divorce and other individual-specific characteristics.

As of March 31, 2006, our installment consumer loan
portfolio totaled $39.6 million, or 3.2% of our total loan
portfolio, which is comparable to the $39.4 million, or
3.3% of our loan portfolio as of December 31, 2005.

As of December 31, 2005, our installment consumer loan
portfolio totaled $39.4 million, or 3.3% of our total loan
portfolio, compared to $24.6 million, or 4.8% of our loan
portfolio, as of December 31, 2004. This increase is
primarily the result of our acquisitions during 2005, offset by
a decrease associated with a strategic decision made by
management not to pursue growth in consumer loans due to our
risk/reward experience for this type of loan.

Commercial and Industrial Loans. Commercial and
industrial loans are made for a variety of business purposes,
including working capital, inventory, equipment and capital
expansion. The terms for commercial loans are generally one to
seven years. Commercial loan applications must be supported by
current financial information on the borrower and, where
appropriate, by adequate collateral. Commercial loans are
generally underwritten by addressing cash flow (debt service
coverage), primary and secondary sources of repayment, the
financial strength of any guarantor, the borrowers
liquidity and leverage, management experience, ownership
structure, economic conditions and industry specific trends and
collateral. The loan to value ratio depends on the type of
collateral. Generally speaking, accounts receivable are financed
at between 50% to 80% of accounts receivable less than
90 days past due. Inventory financing will range between
50% and 80% depending on the borrower and nature of inventory.
We require a first lien position for those loans.

As of March 31, 2006, commercial and industrial loans
outstanding totaled $166.0 million, or 13.3% of our loan
portfolio, compared to $175.4 million, or 14.6% of our loan
portfolio, as of December 31, 2005. This decrease is
primarily the result of the reclassification of several large
loans, which refinanced during the first quarter of 2006 and
were reclassified into commercial real estate as a result of a
change in the collateral.

As of December 31, 2005, commercial and industrial loans
outstanding totaled $175.4 million, or 14.6% of our loan
portfolio, compared to $69.3 million, or 13.4% of our loan
portfolio, as of December 31, 2004. This increase is
primarily the result of our acquisitions during 2005, combined
with organic growth in our loan portfolio.

Table 8 presents the distribution of the maturity of our
loans as of December 31, 2005. The table also presents the
portion of our loans that have fixed interest rates versus
interest rates that fluctuate over the life of the loans based
on changes in the interest rate environment.

Table 8: Maturity of Loans

Over One

Year

One Year

Through

Over Five

or Less

Five Years

Years

Total

(In thousands)

Real estate:

Commercial real estate loans:

Non-farm/non-residential

$

94,259

$

234,048

$

83,532

$

411,839

Construction/land development

182,747

93,716

15,052

291,515

Agricultural

7,126

4,093

1,893

13,112

Residential real estate loans:

Residential 1-4 family

72,868

70,955

78,008

221,831

Multifamily residential

10,607

20,419

3,913

34,939

Total real estate

367,607

423,231

182,398

973,236

Consumer

16,603

22,107

737

39,447

Commercial and industrial

90,885

69,640

14,871

175,396

Agricultural

6,409

2,057



8,466

Other

698

4,412

2,934

8,044

Total loans receivable

$

482,202

$

521,447

$

200,940

$

1,204,589

With fixed interest rates

$

294,071

$

398,663

$

49,477

$

742,211

With floating interest rates

188,131

122,784

151,463

462,378

Total

$

482,202

$

521,447

$

200,940

$

1,204,589

Non-Performing Assets

We classify our problem loans into three categories: past due
loans, special mention loans and classified loans (accruing and
non-accruing).

When management determines that a loan is no longer performing,
and that collection of interest appears doubtful, the loan is
placed on non-accrual status. All loans that are 90 days
past due are placed on non-accrual status unless they are
adequately secured and there is reasonable assurance of full
collection of both principal and interest. Our management
closely monitors all loans that are contractually 90 days
past due, treated as special mention or otherwise
classified or on non-accrual status. Generally, non-accrual
loans that are 120 days past due without assurance of
repayment are charged off against the allowance for loan losses.

Table 9 sets forth information with respect to our
non-performing assets as of March 31, 2006 and 2005, and
December 31, 2005, 2004, 2003, 2002, and 2001. As of these
dates, we did not have any restructured loans within the meaning
of Statement of Financial Accounting Standards No. 15.

Table 9: Non-performing Assets

As of March 31,

As of December 31,

2006

2005

2005

2004

2003

2002

2001

(Dollars in thousands)

Non-accrual loans

$

7,824

$

10,100

$

7,864

$

8,959

$

8,600

$

1,671

$

1,175

Loans past due 90 days or more (principal or interest
payments)

411



426

2

52

142

167

Total non-performing loans

8,235

10,100

8,290

8,961

8,652

1,813

1,342

Other non-performing assets

Foreclosed assets held for sale

663

502

758

458

1,274

169

90

Other non-performing assets

4

46

11

53

62

151

107

Total other non-performing assets

667

548

769

511

1,336

320

197

Total non-performing assets

$

8,902

$

10,648

$

9,059

$

9,472

$

9,988

$

2,133

$

1,539

Allowance for loan losses to non- performing loans

296.72

%

239.36

%

291.62

%

182.40

%

170.10

%

314.73

%

286.66

%

Non-performing loans to total loans

0.66

0.84

0.69

1.73

1.73

0.64

0.57

Non-performing assets to total assets

0.45

0.56

0.47

1.18

1.24

0.58

0.48

Our non-performing loans are comprised of non-accrual loans and
loans that are contractually past due 90 days. Our bank
subsidiaries recognize income principally on the accrual basis
of accounting. When loans are classified as non-accrual, the
accrued interest is charged off and no further interest is
accrued, unless the credit characteristics of the loan improves.
If a loan is determined by management to be uncollectible, the
portion of the loan determined to be uncollectible is then
charged to the allowance for loan losses.

Total non-performing loans were $8.2 million as of
March 31, 2006, compared to $8.3 million as of
December 31, 2005. If the non-accrual loans had been
accruing interest in accordance with the original terms of their
respective agreements, interest income of approximately $152,000
and $143,000 for the three-month periods ended March 31,
2006 and 2005, respectively, would have been recorded. Interest
income recognized on the non-accrual loans for the three-month
periods ended March 31, 2006 and 2005 was considered
immaterial.

Total non-performing loans were $8.3 million as of
December 31, 2005, compared to $9.0 million as of
December 31, 2004. The acquisitions completed in 2005 had a
minimal impact on non-performing loans as a result of their
favorable asset quality.

During 2003, non-performing loans increased $6.8 million
from the previous year. This increase in the level of
non-performing loans was due to the increase in the volume of
non-performing loans associated with the acquisition of
Community Financial Group during the fourth quarter of 2003.

If the non-accrual loans had been accruing interest in
accordance with the original terms of their respective
agreements, interest income of approximately $550,000 for the
year ended December 31, 2005, $520,000 in 2004, and
$138,000 in 2003 would have been recorded. Interest income
recognized on the non-accrual loans for the years ended
December 31, 2005, 2004, and 2003 was considered immaterial.

A loan is considered impaired when it is probable that we will
not receive all amounts due according to the contracted terms of
the loans. Impaired loans include non-performing loans (loans
past due 90 days or more and non-accrual loans) and certain
other loans identified by management that are still performing.
As of March 31, 2006, average impaired loans were
$5.7 million compared to $9.8 million as of
March 31, 2005. As of December 31, 2005, average
impaired loans were $8.5 million, compared to
$9.6 million in 2004. The acquisitions completed in 2005
had a minimal impact on non-performing loans as a result of
their favorable asset quality. The $1.1 million decrease in
impaired loans from December 31, 2004, primarily relates to
improvement of the asset quality associated with the loans
acquired in the Community Financial Group transaction.

Overview. The allowance for loan losses is maintained at
a level which our management believes is adequate to absorb all
probable losses on loans in the loan portfolio. The amount of
the allowance is affected by: (i) loan charge-offs, which
decrease the allowance; (ii) recoveries on loans previously
charged off, which increase the allowance; and (iii) the
provision of possible loan losses charged to income, which
increases the allowance. In determining the provision for
possible loan losses, it is necessary for our management to
monitor fluctuations in the allowance resulting from actual
charge-offs and recoveries and to periodically review the size
and composition of the loan portfolio in light of current and
anticipated economic conditions. If actual losses exceed the
amount of allowance for loan losses, our earnings could be
adversely affected.

As we evaluate the allowance for loan losses, we categorize it
as follows: (i) specific allocations; (ii) allocations
for classified assets with no specific allocation;
(iii) general allocations for each major loan category; and
(iv) miscellaneous allocations.

Specific Allocations. Specific allocations are made when
factors are present requiring a greater reserve than would be
required when using the assigned risk rating allocation. As a
general rule, if a specific allocation is warranted, it is the
result of an analysis of a previously classified credit or
relationship. Our evaluation process in specific allocations
includes a review of appraisals or other collateral analysis.
These values are compared to the remaining outstanding principal
balance. If a loss is determined to be reasonably possible, the
possible loss is identified as a specific allocation. If the
loan is not collateral dependent, the measurement of loss is
based on the expected future cash flows of the loan.

Allocations for Classified Assets with No Specific
Allocation. We establish allocations for loans rated
special mention through loss in
accordance with the guidelines established by the regulatory
agencies. A percentage rate is applied to each loan category to
determine the level of dollar allocation.

General Allocations. We establish general allocations for
each major loan category. This section also includes allocations
to loans, which are collectively evaluated for loss such as
residential real estate, commercial real estate consumer loans
and commercial and industrial loans. The allocations in this
section are based on a historical review of loan loss experience
and past due accounts. We give consideration to trends, changes
in loan mix, delinquencies, prior losses, and other related
information.

Miscellaneous Allocations. Allowance allocations other
than specific, classified, and general are included in our
miscellaneous section.

Charge-offs and Recoveries. Total charge-offs increased
$225,000, or 86.2%, to $486,000 for the three months ended
March 31, 2006, compared to the same period in 2005. Total
charge-offs increased $2.4 million, or 111.4%, to
$4.6 million for the year ended December 31, 2005,
from $2.2 million in 2004. These increases in charge-offs
are due to our conservative stance associated with asset quality
and does not reflect a downward trend in the asset quality of
our overall loan portfolio. The acquisitions completed in 2005
had a minimal impact on the increase in net charge-offs.

Total charge-offs increased $1.5 million, or 222.6%, to
$2.2 million for the year ended December 31, 2004,
from $676,000 in 2003. Approximately $1.2 million of the
increase in the level of charge-offs during 2004 was related to
a former loan officers portfolio, which included
agricultural and related farmland loans that involved inadequate
underwriting and excessive policy exceptions, among other
issues. Evidence of problems in the portfolio were detected by
internal monitoring reports and corporate loan review in the
fourth quarter of 2003, at which time the loan officer was
relieved of his duties. Following an extensive review of the
situation, management implemented new procedures and controls to
prevent the problems identified in the review. The remaining
balance of the loan officers portfolio as of
March 31, 2006 was $4.0 million. Total charge-offs
related to the officers portfolio have been
$1.6 million ($1.2 million in 2004 and $366,604 in
2005). Specific allocations in the reserve for the remainder of
the portfolio are $204,317, or 5.09% as of March 31, 2006.
The remainder of the increase was primarily due to the increase
in the volume of non-performing loans associated with the
acquisition of Community Financial Group during the fourth
quarter of 2003.

The increased level of recoveries for 2004 was primarily related
to one borrower, combined with the increase in recoveries
resulting from the acquisition of Community Financial Group in
2003.

Table 10 shows the allowance for loan losses, charge-offs and
recoveries as of and for the three-month periods ended
March 31, 2006 and 2005, and as of and for the years ended
December 31, 2005, 2004, 2003, 2002, and 2001.

Allocated Allowance for Loan Losses. We use a risk rating
and specific reserve methodology in the calculation and
allocation of our allowance for loan losses. While the allowance
is allocated to various loan categories in assessing and
evaluating the level of the allowance, the allowance is
available to cover charge-offs incurred in all loan categories.
Because a portion of our portfolio has not matured to the degree
necessary to obtain reliable loss data from which to calculate
estimated future losses, the unallocated portion of the
allowance is an integral component of the total allowance.
Although unassigned to a particular credit relationship or
product segment, this portion of the allowance is vital to
safeguard against the imprecision inherent in estimating credit
losses.

The changes for the three-month period ended March 31,
2006, and for the year 2005 in the allocation of the allowance
for loan losses for the individual types of loans for the most
part are consistent with the changes in the outstanding loan
portfolio for those products from December 31, 2004. In the
opinion of management, any allocation changes not consistent
with the changes in the loan portfolio product would be
considered normal operating changes, not downgrading or
upgrading of any one particular type of loans in the loan
portfolio.

Table 11 presents the allocation of allowance for loan losses as
of the dates indicated.

Table 11: Allocation of Allowance for Loan Losses

As of December 31,

As of March 31,

2006

2005

2004

2003

2002

2001

Allowance

% of

Allowance

% of

Allowance

% of

Allowance

% of

Allowance

% of

Allowance

% of

Amount

Loans(1)

Amount

Loans(1)

Amount

Loans(1)

Amount

Loans(1)

Amount

Loans(1)

Amount

Loans(1)

(Dollars in thousands)

Real estate:

Commercial real estate loans:

Non-farm/non-residential

$

7,468

33.8

%

$

7,202

34.1

%

$

6,212

35.3

%

$

5,505

34.8

%

$

1,786

32.1

%

$

1,119

29.6

%

Construction/land development

6,230

26.6

5,544

24.2

1,690

22.6

1,407

14.8

862

13.3

449

9.7

Agricultural

583

1.1

407

1.1

493

2.5

491

1.0

123

1.8

77

1.5

Residential real estate loans:

Residential 1-4 family

3,270

17.7

3,317

18.4

2,185

16.7

2,710

15.8

1,005

20.7

673

21.0

Multifamily residential

375

2.9

423

2.9

156

3.4

85

3.3

107

2.2

78

2.5

Total real estate

17,926

82.1

16,893

80.7

10,736

80.5

10,198

69.7

3,883

70.1

2,396

64.3

Consumer

770

3.2

682

3.3

526

4.8

724

6.3

440

7.9

410

10.9

Commercial and industrial

3,977

13.3

4,059

14.6

2,025

13.4

2,241

20.5

908

16.4

766

20.3

Agricultural

391

0.7

505

0.7

316

1.2

572

2.9

475

5.6

275

4.5

Other

19

0.7



0.7



0.1



0.6



0.0



0.0

Unallocated

1,352

2,036

2,742

982





Total

$

24,435

100.0

%

$

24,175

100.0

%

$

16,345

100.0

%

$

14,717

100.0

%

$

5,706

100.0

%

$

3,847

100.0

%

(1)

Percentage of loans in each category to loans receivable.

Investments and Securities

Our securities portfolio is the second largest component of
earning assets and provides a significant source of revenue.
Securities within the portfolio are classified as
held-to-maturity,
available-for-sale, or trading based on the intent and objective
of the investment and the ability to hold to maturity. Fair
values of securities are based on quoted market prices where
available. If quoted market prices are not available, estimated
fair values are based on quoted market prices of comparable
securities. As of March 31, 2006, and December 31,
2005, we had no
held-to-maturity or
trading securities.

Securities available-for-sale are reported at fair value with
unrealized holding gains and losses reported as a separate
component of shareholders equity as other comprehensive
income. Securities that are held as available-for-sale are used
as a part of our asset/liability management strategy. Securities
may be sold in response to interest rate changes, changes in
prepayment risk, the need to increase regulatory capital, and
other similar factors are classified as available for sale.
Available-for-sale securities were $525.3 million as of
March 31, 2006, compared to $530.3 million as of
December 31, 2005, and $190.4 million as of
December 31, 2004. The estimated duration of our securities
portfolio was 3.1 years as of March 31, 2006.

Securities
held-to-maturity are
reported at amortized historical cost. Securities that
management has the intent and ability to hold until maturity or
on a long-term basis are classified as
held-to-maturity.
Held-to-maturity
investment securities were $100,000 as of December 31, 2004.

As of March 31, 2006, $245.4 million, or 46.7%, of our
available-for-sale securities were invested in mortgage-backed
securities, compared to $256.5 million, or 48.4%, of our
available-for-sale securities as of December 31, 2005. To
reduce our income tax burden, $105.0 million, or 20.0%, of
our available-for-sale securities portfolio as of March 31,
2006, was primarily invested in tax-exempt obligations of state
and political subdivisions, compared to $103.5 million, or
19.5%, of our available-for-sale securities as of
December 31, 2005. Also, we had approximately
$160.3 million, or 30.5%, invested in obligations of
U.S. Government-sponsored enterprises as of March 31,
2006, compared to $157.5 million, or 29.7%, of our
available-for-sale securities as of December 31, 2005.

As of December 31, 2005, $256.5 million, or 48.4%, of
the available-for-sale securities were invested in
mortgage-backed securities, compared to $126.7 million, or
66.5%, of the available-for-sale securities in the prior year.
To reduce our income tax burden, $103.5 million, or 19.5%,
of the available-for-sale securities portfolio as of
December 31, 2005, was primarily invested in tax-exempt
obligations of state and political subdivisions, compared to
$40.1 million, or 21.1%, of the available-for-sale
securities as of December 31, 2004. Also, we had
approximately $157.5 million, or 29.7%, in obligations of
U.S. Government-sponsored enterprises in the
available-for-sale securities portfolio as of December 31,
2005, compared to $15.6 million, or 8.2%, of the
available-for-sale securities in the prior year. The increases
in investment securities from 2004 to 2005 are primarily related
to the acquisitions of TCBancorp, Marine Bancorp and Mountain
View Bancshares.

Certain investment securities are valued at less than their
historical cost. These declines primarily resulted from recent
increases in market interest rates. Based on evaluation of
available evidence, we believe the declines in fair value for
these securities are temporary. It is our intent to hold these
securities to maturity. Should the impairment of any of these
securities become other than temporary, the cost basis of the
investment will be reduced and the resulting loss recognized in
net income in the period the other-than-temporary impairment is
identified.

Table 12 presents the carrying value and fair value of
investment securities for each of the periods and years
indicated.

Table 12: Investment Securities

As of March 31, 2006

As of December 31, 2005

Gross

Gross

Gross

Gross

Amortized

Unrealized

Unrealized

Estimated

Amortized

Unrealized

Unrealized

Estimated

Cost

Gains

(Losses)

Fair Value

Cost

Gains

(Losses)

Fair Value

(In thousands)

Held-to-Maturity

State and political subdivisions

$



$



$



$



$



$



$



$



Total

$



$



$



$



$



$



$



$



Available-for-Sale

U.S. Government-sponsored enterprises

$

165,262

$

12

$

(4,960

)

$

160,314

$

162,165

$

27

$

(4,723

)

$

157,469

Mortgage-backed securities

254,014

8

(8,579

)

245,443

264,666

16

(8,209

)

256,473

State and political subdivisions

104,526

1,219

(759

)

104,986

102,928

1,279

(746

)

103,461

Other securities

14,979



(465

)

14,514

13,571



(672

)

12,899

Total

$

538,781

$

1,239

$

(14,763

)

$

525,257

$

543,330

$

1,322

$

(14,350

)

$

530,302

As of December 31,

2004

2003

Gross

Gross

Gross

Gross

Amortized

Unrealized

Unrealized

Estimated

Amortized

Unrealized

Unrealized

Estimated

Cost

Gains

(Losses)

Fair Value

Cost

Gains

(Losses)

Fair Value

(In thousands)

Held-to-Maturity

State and political subdivisions

$

100

$



$



$

100

$

100

$

3

$



$

103

Total

$

100

$



$



$

100

$

100

$

3

$



$

103

Available-for-Sale

U.S. Government-sponsored enterprises

$

15,646

$

18

$

(86

)

$

15,578

$

22,019

$

31

$

(104

)

$

21,946

Mortgage-backed securities

127,316

249

(898

)

126,667

103,677

282

(203

)

103,756

State and political subdivisions

39,564

717

(147

)

40,134

30,684

49

(15

)

30,718

Other securities

8,010

15

(38

)

7,987

5,362

126

(57

)

5,431

Total

$

190,536

$

999

$

(1,169

)

$

190,366

$

161,742

$

488

$

(379

)

$

161,851

Table 13 reflects the amortized cost and estimated fair value of
debt securities as of December 31, 2005, by contractual
maturity and the weighted average yields (for tax-exempt
obligations on a fully taxable equivalent basis) of those
securities. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or
prepay obligations, with or without call or prepayment penalties.

Our deposits averaged $1.4 billion for the three-month
period ended March 31, 2006, $1.2 billion for the year
ended December 31, 2005, and $553.7 million for 2004.
Total deposits increased $80.3 million, or 5.6%, to
$1.5 billion as of March 31, 2006, from
$1.4 billion as of December 31, 2005. Total deposits
increased $874.2 million, or 158.1%, to $1.4 billion
as of December 31, 2005, from $552.9 million as of
December 31, 2004. Deposits are our primary source of
funds. We offer a variety of products designed to attract and
retain deposit customers. Those products consist of checking
accounts, regular savings deposits, NOW accounts, money market
accounts and certificates of deposit. Deposits are gathered from
individuals, partnerships and corporations in our market areas.
In addition, we obtain deposits from state and local entities
and, to a lesser extent, U.S. Government and other
depository institutions. Our policy also permits the acceptance
of brokered deposits.

The interest rates paid are competitively priced for each
particular deposit product and structured to meet our funding
requirements. We will continue to manage interest expense
through deposit pricing and do not anticipate a significant
change in total deposits unless our liquidity position changes.
We believe that additional funds can be attracted and deposit
growth can be accelerated through deposit pricing if we
experience increased loan demand or other liquidity needs. The
increase in interest rates paid from 2004 to 2006 is reflective
of the Federal Reserve increasing the Federal Funds rate
beginning in 2004 and the associated repricing of deposits
during those years combined with the acquisition of Marine
Bancorp. The acquisition of Marine Bancorp increased our average
rate as a result of the higher interest rate environment in the
Florida Keys. The decrease in interest rates paid from 2003 to
2004 is reflective of the Federal Reserve decreasing the Federal
Funds rate during 2002 and 2003 and the associated repricing of
deposits during those years.

Table 14 reflects the classification of the average deposits and
the average rate paid on each deposit category which is in
excess of 10 percent of average total deposits, for the
three-month periods ended March 31, 2006 and 2005, and the
years ended December 31, 2005, 2004, and 2003.

Table 15 presents our maturities of large denomination time
deposits as of December 31, 2005, and 2004.

Table 15: Maturities of Large Denomination Time Deposits
($100,000 or more)

As of December 31,

2005

2004

Balance

Percent

Balance

Percent

(Dollars in thousands)

Maturing

Three months or less

$

164,233

40.8

%

$

44,143

33.9

%

Over three months to six months

76,664

19.0

35,544

27.3

Over six months to 12 months

87,792

21.8

27,252

21.0

Over 12 months through two years

37,949

9.4

20,644

15.9

Over two years

36,392

9.0

2,408

1.9

Total

$

403,030

100.0

%

$

129,991

100.0

%

FHLB and Other Borrowings

Our FHLB and other borrowings were $139.3 million as of
March 31, 2006. The outstanding balance for March 31,
2006, includes $16.1 million of short-term FHLB advances
and $123.2 million of FHLB long-term advances.

Our FHLB and other borrowings were $117.1 million as of
December 31, 2005, and $74.9 million as of
December 31, 2004. The outstanding balance for
December 31, 2005, includes $4.0 million of short-term
advances and $113.1 million of long-term advances. The
outstanding balance for December 31, 2004, includes
$31.0 million of short-term advances and $43.9 million
of long-term advances. Short-term borrowings consist primarily
of short-term FHLB borrowings. Long-term borrowings consist of
long-term FHLB borrowings and a line of credit with another
financial institution. Our remaining FHLB borrowing capacity was
$222.3 million as of December 31, 2005, and
$166.9 million as of December 31, 2004.

We increased our long-term borrowings $69.2 million, or
157.9%, to $113.1 million as of December 31, 2005,
from $43.9 million as of December 31, 2004. This
increase is primarily a result of the acquisition of TCBancorp
and Marine Bancorp during 2005, combined with a modest increase
in FHLB borrowings in our

other bank subsidiaries and an advance on our line of credit.
The FHLB borrowings increase in our other bank subsidiaries is
associated with a strategic decision to better manage interest
rate risk on specific new loan fundings and commitments made
during 2005. The advance on our line of credit is the result of
using this line for approximately $14.0 million of the
purchase price of Mountain View Bancshares.

Subordinated Debentures

Subordinated debentures, which consist of guaranteed payments on
trust preferred securities, were $44.7 million,
$44.8 million and $24.2 million as of March 31,
2006, and December 31, 2005, and 2004, respectively. The
$20.6 million increase in subordinated debentures for 2005
is primarily associated with a $15.4 million private
placement during 2005, combined with $5.2 million acquired
in the acquisition of Marine Bancorp.

On November 10, 2005, we completed a private placement of
trust preferred securities in an aggregate net principal amount
of $15.0 million. We used the $15.0 million of net
proceeds from the offering to retire interim financing received
in connection with the third quarter acquisition of Mountain
View Bancshares.

Table 16 reflects subordinated debentures as of March 31,
2006, and December 31, 2005, and 2004, which consisted of
guaranteed payments on trust preferred securities with the
following components:

Table 16: Subordinated Debentures

As of December 31,

As of March 31,

2006

2005

2004

(In thousands)

Subordinated debentures, due 2030, fixed at 10.60%, callable
beginning in 2010 with a prepayment penalty declining from 5.30%
to 0.53% depending on the year of prepayment, callable in 2020
without penalty

$

3,493

$

3,516

$

3,600

Subordinated debentures, due 2033, fixed at 6.40% during the
first five years and at a floating rate of 3.15% above the
three-month LIBOR rate, reset quarterly, thereafter, callable in
2008 without penalty

Subordinated debentures, due 2035, fixed rate of 6.81% during
the first ten years and at a floating rate of 1.38% above the
three-month LIBOR rate, reset quarterly, thereafter, callable in
2010 without penalty

15,464

15,465



Total

$

44,731

$

44,755

$

24,219

The trust preferred securities are tax-advantaged issues that
qualify for Tier 1 capital treatment subject to certain
limitations. Distributions on these securities are included in
interest expense. Each of the trusts is a statutory business
trust organized for the sole purpose of issuing trust securities
and investing the proceeds in our subordinated debentures, the
sole asset of each trust. The trust preferred securities of each
trust represent preferred beneficial interests in the assets of
the respective trusts and are subject to mandatory redemption
upon payment of the subordinated debentures held by the trust.
We wholly own the common securities of each trust. Each
trusts ability to pay amounts due on the trust preferred
securities is solely dependent upon our making payment on the
related subordinated debentures. Our obligations under the
subordinated securities and other relevant trust agreements, in
aggregate, constitute a full and unconditional guarantee by us
of each respective trusts obligations under the trust
securities issued by each respective trust.

Presently, the funds raised from the trust preferred offerings
will qualify as Tier 1 capital for regulatory purposes,
subject to the applicable limit, with the balance qualifying as
Tier 2 capital.

March 31, 2006 Overview. As of March 31, 2006,
our shareholders equity totaled $169.0 million, and
our equity to asset ratio was 8.6%, compared to 8.7% as of
December 31, 2005. This decrease is reflective of the
continued leveraging of our balance sheet, and is associated
with the organic growth of our loans, deposits and total assets
during the first quarter of 2006.

2005 Overview. As of December 31, 2005, our
shareholders equity totaled $165.9 million, and our
equity to asset ratio was 8.7%, compared to 13.2% as of
December 31, 2004. This decrease is primarily the result of
leveraging our balance sheet with the acquisitions completed
during 2005.

Stock Split. On May 31, 2005, we completed a
three-for-one stock split effected in the form of a stock
dividend. This resulted in issuing two additional shares of
stock to the common shareholders for each share previously held.
As a result of the stock split, the accompanying consolidated
financial statements reflect an increase in the number of
outstanding shares of common stock and the $78,000 transfer of
the par value of these additional shares from capital surplus.
All share and per share amounts have been restated to reflect
the retroactive effect of the stock split, except for our
capitalization.

Cash Dividends. We declared cash dividends on our common
stock, Class A preferred stock, and Class B preferred
stock of $0.02, $0.06, and $0.14 per share, respectively for the
three-month period ended March 31, 2006. We declared cash
dividends on our common stock, Class A preferred stock, and
Class B preferred stock of $0.070, $0.250 and
$0.330 per share, respectively, for the year ended
December 31, 2005, and $0.043, $0.250 and $0.000 per
share, respectively, for 2004. No dividends were paid on our
Class B preferred stock during 2004 since the Class B
preferred stock was not issued until June 2005 in connection
with the acquisition of Marine Bancorp. The common per share
amounts are reflective of the three-for-one stock split during
2005.

Liquidity and Capital Adequacy Requirements

Parent Company Liquidity. The primary sources for payment
of our operating expenses and dividends are current cash on hand
($7.8 million as of March 31, 2006, and
$5.0 million as of December 31, 2005), dividends
received from our bank subsidiaries, and a $30.0 million
line of credit with another financial institution
($14.0 million borrowed as of December 31, 2005).

Dividend payments by our bank subsidiaries are subject to
various regulatory limitations. As the result of special
dividends paid by our bank subsidiaries during 2005 (primarily
to provide cash for the Marine Bancorp and Mountain View
Bancshares acquisitions), as of December 31, 2005, our bank
subsidiaries did not have any significant undivided profits
available for payment of dividends to us, without prior approval
of the regulatory agencies. However, two of our bank
subsidiaries had excess capital as of December 31, 2005. In
January 2006 we received special approval from the regulatory
agencies for those bank subsidiaries to collectively pay
$19.0 million in additional dividends to us, and we used
those dividends to repay the $14.0 million advance on our
line of credit and to fund our additional investment of
$3.0 million in White River Bancshares.

During 2006, our Arkansas bank subsidiaries may pay dividends to
us up to 75% of their current earnings. The Arkansas banks paid
us 50% of their current earnings during the first quarter of
2006. Due to Marine Banks organic growth, we do not expect
to take dividends from Marine Bank during 2006. As a result of
Marine Banks organic growth during the first quarter of
2006, we made a $2.5 million capital infusion into Marine
Bank in the second quarter of 2006 to better position this
institution for anticipated future growth. See Supervision
and Regulation  Payment of Dividends.

Risk-Based Capital. We as well as our bank subsidiaries
are subject to various regulatory capital requirements
administered by the federal banking agencies. Furthermore, we
are deemed by federal regulators to be a source of financial
strength for White River Bancshares, despite owning only 20% of
its equity. Failure to meet minimum capital requirements can
initiate certain mandatory and other discretionary actions by
regulators that, if enforced, could have a direct material
effect on our financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective
action, we must meet specific capital

guidelines that involve quantitative measures of our assets,
liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. Our capital amounts and
classifications are also subject to qualitative judgments by the
regulators as to components, risk weightings and other factors.

Quantitative measures established by regulation to ensure
capital adequacy require us to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier 1
capital to risk-weighted assets, and of Tier 1 capital to
average assets. Management believes that, as of March 31,
2006, and December 31, 2005 and 2004, we met all regulatory
capital adequacy requirements to which we were subject.

Table 17 presents our risk-based capital ratios as of
March 31, 2006 and December 31, 2005 and 2004.

Table 17: Risk-Based Capital

As of December 31,

As of March 31,

2006

2005

2004

(Dollars in thousands)

Tier 1 capital

Shareholders equity

$

169,040

$

165,857

$

106,610

Qualifying trust preferred securities

43,000

43,000

23,000

Goodwill and core deposit intangibles, net

(44,254

)

(44,516

)

(22,816

)

Qualifying minority interest





9,238

Unrealized loss on available-for-sale securities

8,191

7,903

858

Other





(11,751

)

Total Tier 1 capital

175,977

172,244

105,139

Tier 2 capital

Qualifying allowance for loan losses

18,219

17,658

7,664

Other





(7,664

)

Total Tier 2 capital

18,219

17,658



Total risk-based capital

$

194,196

$

189,902

$

105,139

Average total assets for leverage ratio

$

1,890,946

$

1,868,143

$

779,768

Risk weighted assets

$

1,451,266

$

1,406,131

$

604,413

Ratios at end of year

Leverage ratio

9.31

%

9.22

%

13.47

%

Tier 1 risk-based capital

12.13

12.25

17.39

Total risk-based capital

13.38

13.51

17.39

Minimum guidelines

Leverage ratio

4.00

%

4.00

%

4.00

%

Tier 1 risk-based capital

4.00

4.00

4.00

Total risk-based capital

8.00

8.00

8.00

As of the most recent notification from regulatory agencies, our
bank subsidiaries were well-capitalized under the
regulatory framework for prompt corrective action. To be
categorized as well-capitalized, we and our bank
subsidiaries must maintain minimum leverage, Tier 1
risk-based capital, and total risk-based capital ratios as set
forth in the table. There are no conditions or events since that
notification that we believe have changed the bank
subsidiaries categories.